On Wednesday, Bernstein, a prominent market analysis firm, released a statement focusing on the current state of the U.S. Restaurants sector. The firm aggregated financial and operational performance metrics from over 25 top U.S. restaurant public equities, which together represent an approximate enterprise value of $735 billion. This comprehensive data draws from the latest quarterly figures ending September 2024.
The analysis revealed that same-store sales (SSS) saw a year-on-year decline of 1.0%, falling below historical trends. This is attributed to the continued compression of overall industry traffic. Despite this downturn, the latest monthly data suggests that the sector may have weathered the worst of the decline.
Valuations in the restaurant industry remain high, though they have experienced a decrease in recent months due to concerns about consumer demand. Bernstein analysts maintain a positive outlook, suggesting that the recent devaluation presents attractive investment opportunities, particularly in companies they believe to be long-term compounders.
Among these, Chipotle Mexican Grill (NYSE:CMG) and Wingstop (NASDAQ:WING) were highlighted for their exceptional value propositions and industry outperformance.
Furthermore, the firm anticipates that an improving traffic environment could bolster Starbucks (NASDAQ:SBUX) and Restaurant Brands International's (NYSE:NYSE:QSR) Burger King in their turnaround efforts.
However, caution is advised regarding restaurant concepts with significant international exposure, such as Yum! Brands (NYSE:NYSE:YUM), McDonald's (NYSE:NYSE:MCD), and Restaurant Brands International. Despite this, Bernstein expresses a preference for QSR, noting that its relatively lower valuation may already reflect negative market sentiment.
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