The Need to Feed: 3 Fast Food Stocks With the Strongest Upside Potential in 2024
· InvestorPlaceA wide range of markets in the United States are experiencing a period of uncertainty in the wake of stubborn inflation rates reflected in the hotter-than-expected consumer price index (CPI) data reported for March. However, the fast food industry has continued to show its resilience. This is why fast food stocks are such a great buy.
After all, we’re talking about an industry that’s expected to grow to $1.467 trillion in market size by 2028. It will even do it at a CAGR of 6.05%. It’s also worth acknowledging that fast food stocks have dealt with periods of extreme uncertainty before and come out thriving.
The COVID-19 pandemic saw the emergence of social distancing measures. These challenged much of the fast food industry’s traditional revenue streams. However, restaurants tackled the loss of diners by undergoing a widespread series of digital transformation initiatives, These excelled in providing takeaway services to consumers in lockdown.
During the pandemic, data showed that the number of consumers who ordered fast food for delivery lept 28% compared to pre-pandemic levels. Drive-thru services accounted for 44% of all off-premise orders throughout the restaurant industry.
These figures are important for investors because they illustrate the adaptability of fast food stocks to continue securing growth in testing times. As markets react to the prospect of fewer Federal Reserve rate cuts in 2024, it’s more likely that fast food stocks will once again show their adaptability in challenging circumstances. With this in mind, the following stocks could be a strong option to buy and hold in 2024:
Top Fast Food Stocks: McDonald’s (MCD)
Source: Vytautas Kielaitis / Shutterstock
No list of growth-focused fast food stocks would be complete without McDonald’s (NYSE:MCD). We’re talking about a global market leader, boasting 38,000 restaurants throughout 100 countries.
If any stock is well positioned to brush off US market volatility, it’s globally focused firms like McDonald’s.
The stock’s impressive rate of growth should also be a source of comfort for investors. MCD reached an all-time high value in early 2024 before undergoing a market correction of around 8% off the back of missed revenue estimates amid an escalation of geopolitical conflict in the Middle East.
Despite this, McDonald’s long-term prospects are strong. The stock has rallied almost 40% in the past five years. This is an impressive feat considering the impact of the COVID-19 pandemic and 2022’s Wall Street downturn on growth stocks.
The firm’s positive Q1 2024 revenue estimates, which predict a year-over-year earnings increase of 2.7% to $2.70 per share and a 4.7% increase in revenues to $6.17 billion, also illustrate McDonald’s resilience at a time of global economic turbulence.
Crucially, we can also see that the brand is continuing to facilitate growth through a series of strategic partnerships. These partnerships are designed to facilitate more sales growth. There was a recent announcement of a partnership between McDonald’s and Krispy Kreme. This is set to see the latter’s donuts launch in McDonald’s restaurants by 2026. The partnership is a key statement of intent for a firm focused on strengthening its position as a market leader.
Wendy’s (WEN)
Source: Deutschlandreform / Shutterstock.com
Despite posting a decline of almost 15% in 2023, Wendy’s (NASDAQ:WEN) has been one of the fast food market’s brighter performers in the first half of 2024.
Wendy’s doesn’t quite boast the global market presence of McDonald’s. However this dividend stock has been identified as a strong passive income option for investors. It appears set to recover from a series of disappointments that have impacted its value in recent months.
Wendy’s missed its Q4 2023 estimates by posting earnings of 21 cents per share. This was below Wall Street projections of 23 cents. However, the February 2024 arrival of Kirk Tanner appears to be a watershed moment for the stock. Wendy’s has since recovered by more than 10% from its Q1 lows.
Given the challenges and franchise closures Wendy’s faced in 2023, the stock could be an excellent value proposition for investors seeking to buy into the restaurant’s long-term recovery.
Restaurant Brands International (QSR)
Source: Tony Prato / Shutterstock.com
In terms of profitability, Restaurant Brands International (NYSE:QSR) stands as one of the strongest recent performers in this selection.
The stock’s Q4 2023 earnings report showed a surge in profits to $508 million. Net sales climbed 8% to $1.82 billion from $1.68 billion in the previous year.
Restaurant Brands International is the parent company of Burger King, Popeyes, Tim Hortons, Firehouse Subs, and The TDL Group Corp. This impressive repertoire of varied restaurants and fast food services offers an element of diversified security within the sector.
Given these exceptional revenue streams, the debts are consistently covered by earnings for QSR. Its earnings growth has comfortably exceeded the industry average over the past year.
While QSR is also a dividend stock, it’s not considered one of Wall Street’s strongest dividend payers. Fortunately, the outlook for the stock as a whole is rosy enough to overcome this weakness, with estimates suggesting that Restaurant Brands International is set to grow its profit by 59% over the next couple of years.
As wider inflation-driven uncertainty continues to loom over US markets, the security offered by QSR’s strong restaurant repertoire could be an attractive way to safeguard better against volatility.
Given that the stock has already bounced back by more than 125% from its pandemic lows, and has been pushing new all-time high values as recently as March, there’s plenty for investors to be excited about with Restaurant Brands International.
On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dmytro is a finance and investing writer based in London. He is also the founder of Solvid, Pridicto and Coinprompter. His work has been published in Nasdaq, Kiplinger, FXStreet, Entrepreneur, VentureBeat and InvestmentWeek.