The global fast food and quick service restaurant market is expected to grow from $273.20 billion in 2022 to $292.78 billion in 2023 at a compound annual growth rate (CAGR) of 7.2%.
Despite facing inflationary pressures, restaurant sales are registering solid growth. This marks the sixth consecutive month of sales growth for the industry.
The rather good performance of the sector was driven by a rapid rise in menu prices, growth in average checks, and ongoing expansion efforts.
Industry players also reap rewards from their collaborations with delivery services and digital platforms that are gradually changing the way people consume fast food.
3 fast food players set for growth
We have picked three restaurant stocks that will likely benefit from the increasing sales trend and have robust top-line growth despite inflationary pressure. These include McDonald's Corporation (MCD), Domino's Pizza, Inc. (DPZ) and Yum China Holdings, Inc. (YUMC).
McDonald’s
McDonald's is the world's largest fast food restaurant chain, serving over 69 million customers daily in over 100 countries in more than 40,000 outlets. Its main revenue drivers include rent, royalties, and fees paid by the franchisees, in addition to the sales in company-operated restaurants. McDonald's is the world's second-largest private employer with 1.7 million employees.
Revenue: $23.3 billion
Net Income: $5.9 billion
Market Cap: $196.4 billion*
The company’s earnings and sales in 2023 are likely to witness a growth of 13.8% and 9.8% year over year, respectively. MCD has a long-term earnings growth expectation of around 8.9%. .[1]
Stock performance of McDonald’s Corporation in a 5-year timeframe. Source: tradingview.com*
Domino's
Domino's is an American multinational pizza restaurant chain founded in 1960. The company operates as a pizza delivery company in the United States and internationally, with 20,008 locations in more than 90 markets. The pizza chain is owned by master franchisor Domino's Pizza, Inc.
Revenue: $4.5 billion
Net Income: $449.6 million
Market Cap: $12.7 billion*
The company benefits from strong growth driven by a solid digital ordering system and higher global retail sales. DPZ’s global expansion initiatives with presence in more than 90 global markets are adding to its growth trend. The company’s earnings in 2023 are likely to see a growth of 9.6% year over year. DPZ has a long-term earnings growth expectation of 13%. [2]
Stock performance of Domino’s Pizza Inc. in a 5-year timeframe. Source: tradingview.com*
Yum China
Revenue: $9.8 billion
Net Income: $864 million
Market Cap: $23.4 billion*
Yum China Holdings, Inc. was founded in 1987 and is headquartered in Shanghai, China.
It engages in the business of franchising and owning entities that in turn own and operate restaurants. The company is divided into the following segments: Kentucky Fried Chicken (KFC), Pizza Hut, and other segments, including Taco Bell, and Lavazza. Under the holding’s umbrella, we can also find brands specifically positioned to cater to the Chinese market, like Little Sheep (hot pot chain) or Huang Ji Huang (fun stewpot concept).
The company’s strategy relies on innovation, unit expansion and digitalization efforts. Yum China is also gradually shifting toward digital and content marketing to expand its customer base.
The company’s earnings and sales in 2023 are likely to witness a growth of 96.2% and 17.4% year over year, respectively.[3]
Stock performance of Yum China Holdings, Inc. in a 5-year timeframe. Source: tradingview.com*
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Adam Austera, chief analyst Ozios
* Past performance is no guarantee of future results.
[1,2,3] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
