As the fresh food fad turned into a fully-fledged, multibillion dollar market, many began to call for the death of the fast-food industry. But while more people eat healthier than ever today, the fast-food market is still thriving.
On the grocery side of things, nearly everyone knows that Amazon AMZN spurred further competition in the fresh food market with its purchase of Whole Foods. Meanwhile, grocery delivery upstarts like Instacart quickly secured deals with Costco COST , Kroger KR , and other large chains, leading to talks of a possible IPO .
This competition has, in many cases, led to greater access to healthy eating options. Yet, for the most part, the cost is still far too high for a large percentage of the population to make healthy food a viable option.
What’s more, fast-food chains remain a popular option for on-the-go eaters and low-income families. Restaurants and grocery stores are obviously not the same thing, but it has been interesting to watch fast-food giants continue to grow while access to healthier groceries became the norm.
With that said, let’s take a look at three fast-food stocks investors might want to consider scooping up.
1. McDonald’s Corporation MCD
This historic fast-food burger chain can be found throughout the world, and it even tried to offer more healthy options along the way to expand its reach. Two weeks ago, McDonald’s reported that its full-year and Q4 2017 comparable store sales both climbed over 5.3%, which marked its best comps performance in six years. The company noted that this growth was driven, in part, by “tremendous progress” in its delivery and mobile order and pay business.
McDonald’s is currently a Zacks Rank #2 (Buy) and is now projected to see its Q1 earnings surge by 14.29%, based on our latest Zacks Consensus Estimate. McDonald’s is also expected to expand its EPS figure at an annualized rate of 9% over the next three to five years.
2. Domino’s Pizza, Inc. DPZ
This pizza chain’s ability to constantly adapt to changing consumer habits, while also bolstering its online and mobile ordering, helped Domino’s expand into one of the world’s biggest fast-food chains, now boasting 14,400 stores in over 85 international markets. Domino’s is also currently a Zacks Rank #2 (Buy) and sports “B” grades for both Growth and Momentum in our Style Scores system.
Investors should also note that Domino’s is expected to see its Q4 sales pop by over 10% to hit $903.2 million when it reports next Tuesday, Feb. 20. On top of that, the chain is projected to see its earnings soar 31.08% to reach $1.94 per share, based on our current estimates.
Domino’s has met or topped earnings estimates in the trailing six quarters, and this streak seems poised to continue. The company’s current Earnings ESP is 1.06%, and paired with its high Zacks Rank, this means it is highly likely to beat Q4 estimates, as analysts seem to be more confident in Domino’s recently (also read: Earnings Season Ain’t Over: 3 Stocks Likely to Beat Estimates This Week ).
3. Sonic Corp. SONC
Sonic hardly holds a candle to the size of either McDonald’s or Domino’s, but this fast-food chain saw its first-quarter fiscal 2018 earnings surge 25% last month. Sonic is currently a Zacks Rank #2 (Buy) and is now projected to see its earnings climb by 22.40% for the full year to reach $1.53 per share.
Sonic is also expected to expand its EPS figure at an annualized rate of 14.70% over the next three to five years. As a possible sign of further health at this growing fast-food chain, Sonic recently noted that it plans to open 70 to 80 new franchise drive-in locations in fiscal 2018.
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