This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Restaurant Stocks: Earnings to Watch

(Restaurant stocks earnings article updated with Darden Restaurants results.)

NEW YORK ( TheStreet) -- Expectations were high for the $184 billion restaurant sector this earnings season.

With the inherent limits to the number of new stores any one brand can open, still-uncertain economic times and trends pointing toward rising commodities all converging, valuations in the restaurant space were relatively swollen, noted Deutsche Bank analyst Jason West.

>> Bankruptcy Watch: 20 Riskiest Restaurant Stocks

The industry as a whole is expected to grow 2.5% annually through 2015. Key drivers of the sector, according to IBISWorld analyst Nima Samadi, include consumer spending, elevated health consciousness, competition from full-service restaurants, per capita disposable income and overall consumer sentiment.

West was more optimistic in the short term, citing the combination of "still-recovering sales and still-benign costs (both food and labor)" making for "a positive backdrop to third quarter of 2010 results." The analyst also noted that weak economic data stokes the likelihood of more federal aid in the way of stimulus, which tends to be good for discretionary stocks like those in the restaurant sector.

>>5 Restaurant Stocks to Buy Now

Stifel Nicolaus analyst Steve West said that "easy comps and extensive cost savings should offset strained sales from depressed consumer spending, boosting restaurant third-quarter 2010 earnings-per-share growth of 6% (though still less than 10% on average)."

He expected average comps growth of 18% in the casual dining space to outpace a 2% comps uptick in the quick-service space -- the first time in years that casual restaurants would outpace.

Same-store sales, also known as comps, which measure sales at stores open at least one year -- a closely watched metric in the restaurant industry -- were expected to grow modestly in the third quarter, Deutsche Bank's West said, with the group averaging 1.2% growth in the period. Despite the expected uptick, the analyst expected demand would "just hold steady in coming months, rather than show robust acceleration," and that comparisons would be more difficult in the fourth quarter for most stocks in the sector.

1 of 22

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs