In light of McDonaldâs Inc. (MCD, Financial) reporting weak comparable sales results in March and optimism regarding the peak of the Covid-19 outbreak, three restaurant stocks with good business predictability and high dividend yields are Cheesecake Factory Inc. (CAKE, Financial), Cracker Barrel Old Country Store Inc. (CBRL, Financial) and Dave & Busterâs Entertainment Inc. (PLAY, Financial).
Fast-food chain McDonaldâs updates preliminary results for March
McDonaldâs, a popular fast-food restaurant chain known for products like the Big Mac and Chicken McNuggets, said on Wednesday that comparable sales declined 22% during March as the coronavirus outbreak âsignificantly disruptedâ the companyâs business according to an update from CEO Chris Kempczinski. Comp sales in the U.S. sank 13.4% in March while comp sales in international opened markets tumbled 34.9%.
The Chicago-based company withdrew its full-year and long-term outlook issued on Feb. 26 due to the uncertainty caused by the virus.
Stock rises despite weak March comp sales
Shares of McDonaldâs traded at an intraday high of $179.42, an increase of approximately 2.18% from the previous close of $175.59.
GuruFocus ranks McDonaldâs profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7, a return on assets that outperforms 94.07% of global competitors and operating margins that have increased approximately 9.10% per year on average over the past five years.
Coronavirus outbreak starts declining, suggesting a peak
Dr. Anthony Fauci, White House health advisor and director of the National Institute of Allergy and Infectious Diseases, said on Fox News that while casualties might increase over the rest of the week, the U.S. âshould see âthe beginning of a turnaroundââ following this week. The Dow Jones Industrial Average closed at 23,433.57, up 779.71 points from the previous close of 22,653.86 and 753.58 points from Mondayâs close of 22,679.99.
As the coronavirus outbreak starts declining, restaurants could eventually return to full capacity. Kempczinski said in his business update that the company is able to âadapt and continue serving customers where it is safe to do so.â Over 75% of McDonaldâs restaurants remain operational, focusing on drive-thru, delivery and take-away. As such, investors might seek opportunities in restaurant companies with good business predictability and high dividend yields as prices remain depressed.
Cheesecake Factory
Cheesecake Factory owns and operates over 200 restaurants under the Cheesecake Factory, Grand Lux CafĂ© and RockSugar Pan Asian Kitchen brands. GuruFocus ranks the Calabasas Hills, California-based companyâs profitability 8 out of 10 on several positive investing signs, which include consistent revenue growth over the past 10 years and a return on equity that is outperforming 90.94% of global competitors.
Cheesecake Factoryâs valuation ranks 10 out of 10 on several signs of undervaluation, which include price-earnings, price-book and price-sales ratios all near 10-year lows. Additionally, Cheesecakeâs price-earnings ratio of 6.49 outperforms 88.18% of global restaurants while its dividend yield of 7.64% outperforms 90.36% of global competitors.
Gurus with large holdings in Cheesecake Factory include Ron Baron (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio).
Cracker Barrel
Cracker Barrel offers home-style meals at its hundreds of restaurants around the U.S. GuruFocus ranks the Lebanon, Tennessee-based companyâs profitability and valuation 8 out of 10 on several positive investing signs, which include expanding operating margins, consistent revenue growth, a return on equity that outperforms 96.44% of global competitors and price-book and price-earnings ratios close to 10-year lows. Cracker Barrelâs dividend yield of 6.28% outperforms 84.77% of global restaurants.
Gurus with large holdings in Cracker Barrel include Jim Simons (Trades, Portfolio)' Renaissance Technologies and Pioneer Investments (Trades, Portfolio).
Dave & Busters
Dave & Busters owns and operates nearly 100 entertainment and dining venues in the U.S. where people can eat, drink and play games. GuruFocus ranks the Dallas-based companyâs profitability 7 out of 10 on several positive investing signs, which include a four-star business predictability rank and operating margins that have increased approximately 1.40% per year on average over the past five years and are outperforming over 80% of global competitors.
Disclosure: No positions.
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