Restaurant Stocks Struggle: 3 Companies are Defying the Odds

The past three months have brought disappointment to the restaurant industry. While the S&P 500 advanced 5.5% during the same period, stocks in the industry collectively slipped 2%, underperforming the broader market. Weighed down by high costs and sluggish foot traffic, the industry continues to grapple with a tough macroeconomic environment that is putting pressure on both margins and momentum.

A rapid increase in menu prices is the primary reason behind traffic erosion. This decline highlights the ongoing challenges that the industry faces in maintaining customer counts, especially as consumers grow frustrated with rising prices.

Yet, amid the gloom, a few standouts are serving up sizzling returns. Cracker Barrel Old Country Store, Inc. CBRL has moved up 46.2%, Shake Shack Inc. SHAK has climbed 41.7% and Wingstop Inc. WING has surged 62.6% over the same period. These names have bucked the industry trend, fueled by brand loyalty, strategic innovation and investor optimism.     

Now the question arises: After such a strong run, can investors still count on Cracker Barrel, Shake Shack and Wingstop to deliver further upside? Let us take a closer look at each to evaluate whether the rally still has legs or if it is time to lock in profits.

3 Restaurant Stocks Worth a Look

Cracker Barrel: The company is benefiting from menu innovation, digital initiatives and strategic remodels. Cracker Barrel is enhancing its menu through a back-of-house optimization initiative aimed at driving efficiencies that boost profitability.

In the fiscal third quarter, comparable-store restaurant sales increased 1% from the same period in fiscal 2024. This marked the fourth consecutive quarter of positive comparable-store sales growth. This increase was mainly driven by a higher average check, which included a 4.9% rise in menu pricing.

In the past 30 days, earnings estimates for fiscal 2025 and 2026 have witnessed upward revisions of 9.9% and 8.4% to $3.10 and $3.48 per share, respectively. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shake Shack: Enhanced operations, menu innovation and store openings continue to drive growth. Also, the emphasis on digital initiatives and licensed business bodes well. Management remains optimistic about the licensing segment, citing strong global partner support and significant room for continued growth.

Development efforts for 2025 are moving faster than initially expected, with Shake Shack now planning to open 45-50 company-operated Shacks this year. Additionally, the company is investing in data and guest recognition tools to create more tailored marketing strategies, aiming to drive higher engagement and conversion rates going forward.

In the past 60 days, earnings estimates for 2025 and 2026 have witnessed upward revisions of 6.3% and 9.6% to $1.34 and $1.71 per share, respectively. The company sports a Zacks Rank #1 at present.

Wingstop: The company is gaining from expansion efforts and a new kitchen operating platform. International expansion is becoming an increasingly significant growth driver for Wingstop, with new markets like Kuwait and Australia showing early signs of strong demand. The company is not just expanding its footprint but is also opening higher-performing restaurants, with some new units already operating above the company’s $3-million AUV target. 

Wingstop unveiled its new kitchen operating platform, Wingstop Smart Kitchen, at the beginning of 2025. This strategic investment is aimed at improving guest visits and enhancing delivery time, which will reflect in the long-term growth trends of its same-store sales.

In the past 60 days, earnings estimates for 2025 and 2026 have witnessed upward revisions of 6.8% and 5% to $3.90 and $5.03 per share, respectively. The company carries a Zacks Rank #2 (Buy).

Summing Up

Cracker Barrel, Shake Shack and Wingstop are bucking the broader restaurant industry's downtrend with strong brand execution, strategic innovation and upbeat investor sentiment. Each is trading above its 50-day moving average, signaling solid technical strength.

Cracker Barrel’s operational revamp, Shake Shack’s digital and global expansion, and Wingstop’s tech-driven growth and international momentum make them stand out. With rising earnings estimates and clear growth strategies, these stocks offer compelling opportunities despite a tough macro backdrop.

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This article originally published on Zacks Investment Research (zacks.com).

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