McDonald’s Yallambie is on May 18, 2020 in Melbourne, Australia.
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As we lap the one-year anniversary of many major lockdowns related to the Covid-19 pandemic, many Americans are mourning what they’ve lost while also looking forward to a return to normalcy later this year. Yet there’s at least one sector for which the pandemic never seemed to exist, judging by its stock performance, despite being one of the hardest hit.
That sector is restaurants. Given how huge a disruption the pandemic proved to be—from restrictions on indoor dining to consumers’ massive shift toward cooking at home for epidemiological, economical, and entertainment reasons—Barron’s wanted to see how the leaders and laggards were doing one year on. Except there appear to be none of the latter.
Screening for U.S.-based restaurants with a market capitalization of $1 billion or more returned a group of stocks that were up at minimum more than 20%, and on average more than 200%. All but two beat out the S&P 500’s 63% gain in the past year through Thursday’s close. Here’s a rundown of the three best and “worst” performers, and what their valuation looks like now, using data from FactSet.
The Losers
While pizza may have been the official food of the pandemic, Domino’s Pizza (DPZ) was the worst performer of the group, gaining just 21.7%. The company turned in a disappointing report last month, and like other stocks that benefited from Covid-19, investors have worried that it will have trouble seeing ongoing success in a reopened economy. It changes hands for 27.3 times forward earnings.
Fast food giant McDonald’s (MCD) was second in line, climbing 51.1%. While it held up better than most during some of last year’s Covid surges, the company’s most recent quarter didn’t wow investors. Still, it scored an upgrade this week, and has seen success with its recently launched chicken sandwich, which has some analysts feeling upbeat that it can shake off momentum concerns that have dogged other pandemic winners. It trades at 26.1 times forward earnings.
Yum! Brands
(YUM) had the third lowest performance of the group, though it still jumped 65.5%. The owner of KFC, Pizza Hut, and Taco Bell got a boost from online orders in its better-than-expected fourth quarter, and raised its dividend soon after. The company has also been expanding its partnership with plant-based protein maker
Beyond Meat
(BYND). Yum trades at 27 times forward earnings.
The Winners
Brinker International
(EAT) takes the crown with a nearly 769% jump. The operator of Chili’s and Maggiano’s struggled with dine-in restrictions, and had to withdraw guidance at the end of December as surging Covid cases kept people out of its restaurants. Yet analysts expect the company will quickly rebound once mass vaccination makes indoor dining safe again. And despite its huge rally, it trades more cheaply than the worst performers of the group, at just 20 times next 12 month earnings.
A 600% gain put
Dave & Buster’s
(PLAY) in second place. The company’s sales fell below expectations in the past three quarters, although it managed to lose less than analysts expected in the past two. Yet consensus estimates call for losses next year as well, so it doesn’t have earnings to calculate a forward price-to-earnings ratio.
BJ’s Restaurants
(BJRI) gained 458%, making in the third best performer. Yet it’s the priciest on the list, at 970.5 times forward earnings. It too recorded smaller than anticipated losses in two of past three quarters, and sales have held up relatively well.
Write to Teresa Rivas at [email protected]
