These Top Restaurant Stocks Seeing New Earnings Momentum This Year

Restarant stocksGetting back to restaurant stocks, with a pickup in consumer spending and lower gasoline prices, a number of these positions have been top earners over the last couple of quarters.

The trend should continue this year. Restaurant stocks remain a top choice for equity speculators, with some key stocks reporting double-digit earnings growth.

Three top restaurant stocks I’d like to take a closer look at are Sonic Corp. (SONC), Fiesta Restaurant Group, Inc. (FRGI), and Zoe’s Kitchen, Inc. (ZOES).

Sonic a Leader in Growth Among Restaurant Companies

Sonic Corp. (SONC), the largest drive-in chain in the U.S., has been doing very well lately. The stock has tripled over the last two years and the company’s numbers have been downright good.

According to the company, its fiscal 2015 second quarter (ended February 28, 2015) saw same-store sales grow 11.5% over the same quarter last year, with quarterly revenues growing 15% to $126 million.

And the company’s bottom line improved substantially, growing to $7.7 million from $4.1 million, or doubling its earnings per share for $0.14 over the same quarter last year.

Adjusted earnings per share for full-year 2015 are expected to grow 25%–27% over last year’s, and new drive-in openings are expected to number between 34 and 44 franchise locations.

Sonic recently began paying a dividend to stockholders, and management bought back approximately 19% of its common share float over the last three years.

The company’s latest quarterly results fall on the back of a number of good quarters. While expensively priced among its peer group of restaurant stocks, Sonic is likely to keep ticking higher due to its solid operational momentum.

Fiesta Restaurant Group Ticks Higher on the Charts

Fiesta Restaurant Group, Inc. (FRGI), a company I’ve looked at a number of times in these pages (see “Starbucks a Standout Among Strong Restaurant Stocks”), continues to tick higher and is one of the best-performing restaurant stocks this year.

The operator of the Pollo Tropical and Taco Cabana chains is growing by the double-digits. The stock is up more than 450% since listing three years ago. I’d say there is a lot of operational momentum still to be had with this growing business.

Zoe’s Reporting 40% Revenue Growth and Continued Expansion

And then there’s Zoe’s Kitchen, Inc. (ZOES), which is one of the new fast-casual restaurant stocks investors will want to add to their radars. This company delivers Mediterranean-inspired food with the vast majority of its locations being corporate-owned.

In its fourth quarter of 2014, the company’s total revenues grew 40% to $40.0 million on a 7.8% increase in comparable restaurant sales.

The company is still investing heavily in its expansion and is operating at a loss as a result. Fourth-quarter adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) improved 120% to $2.8 million, while its net loss came in at $1.6 million, or ($0.08) per share.

For all of 2014, Zoe’s produced a 48% gain in yearly sales to $172 million. Net loss for the year was $10.0 million, or ($0.58) per diluted share.

Zoe’s hopes total sales will grow to between $215 and $220 million this year, with 31 to 33 new locations planned.

Restaurant stocks are almost always a worthy sector for equity market speculators, especially in an economic recovery, when consumers adjust their spending.

Restaurant stocks are a bright light in an otherwise slow-growth environment. There are very few sectors generating double-digit growth like these companies.