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The Tastiest Investments in Restaurants

NEW YORK ( TheStreet) -- Restaurant earnings, on the whole, are bad enough to make any investor's stomach churn.

Already this quarter we have seen shares of companies like Darden (DRI - Get Report) and Brinker (EAT - Get Report) tumble after they reported better-than-expected earnings, but on disappointing sales. "These companies are surpassing expectations through lower commodity costs and labor efficiencies," Stifel Nicolaus analyst Steve West says. "But Wall Street is tired of this and wants to see quality earnings."

Well, Wall Street will just need to be patient. Sales in the sector are not expected to turn until the third quarter of 2010, at the earliest, when they reach the anniversary point of the easiest annual comparisons. And consumer price index data released earlier this month paints a dreary picture. Food away from home rose just 2.6%, the lowest level of growth year-over-year since 2003.

Regardless, even though the outlook for the sector for the remainder of the year is bleak, some stocks that the savvy investors should consider gobbling up.

"Right now, and over the next several quarters, it is actually a good buying opportunity, since the rate of change is still positive," Larry Miller, analyst at RBC Capital Markets, says.
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