Hiring struggles. Supply chain issues. Food cost inflation.

These are just some of the challenges faced by U.S. quick service restaurants (QSRs) in 2023. To the group’s credit though, restaurants kept pace with the broader equity market. Up 25% last year, the AdvisorShares Restaurant ETF (EATZ) matched the return of the S&P 500.

Fortunately, these headwinds have largely subsided, paving the way for potentially tastier financial performances this year. According to QSR Magazine, there will be several trends that shape the fast food landscape in 2024, including: 

• Omnichannel - In a crowded, ultra-competitive space, restaurant chains that have efficient dine-in, carry-out, delivery, order ahead and at-table options will be able to generate more sales from convenience-minded consumers.
• Technology - Tap-to-pay, new online ordering features and voice-driven artificial intelligence (AI) phone ordering are among the tech advancements expected to improve service speed and accuracy.
• Customer Experience - Even as the industry goes high-tech, personalization and limited-time offers are expected to drive customer engagement and purchase decisions.

That’s certainly a lot to chew on for investors who are contemplating which if any, restaurant stocks to buy. In the coming weeks, fourth quarter financial results and management outlooks may shed light on which companies are best positioned to capitalize on the latest fast food trends and win over customers. Here are a few to keep on the menu.

When does Yum Brands report Q4 results? 

Yum! Brands, Inc. (NYSE: YUM) is scheduled to announce fourth-quarter results before the market open on February 7th. The KFC, Pizza Hut and Taco Bell owner handily topped Wall Street earnings estimates in Q2 and Q3. The solid comp sales growth reported in Q3 was led by 8% growth at Taco Bell, which management is prioritizing for increased delivery capabilities. 

Fourth quarter results are likely to benefit from low-priced menu options (especially at Taco Bell and KFC) that match consumers’ appetites and budgets. Yum! Brands could also get a boost from a robust holiday shopping season that possibly coincided with frequent on-the-go food stops. YUM, which lagged the industry in 2023 with a 2% gain, is expected to have grown Q4 revenue and EPS by 5% and 8%, respectively. 

What is McDonald’s projected Q4 EPS?

When McDonald’s Corporation (NYSE: MCD) reports fourth-quarter financials on February 5th, analysts will be looking for a 9% year-over-year EPS growth to $2.82. If history repeats, however, shareholders will be ‘lovin it.’ McDonald’s has surpassed the consensus EPS estimate for seven consecutive quarters. In the process, its stock came within 65 cents of hitting $300.00 last year and has rebounded from a rare four-month slump to make another run at the milestone. 

McDonald’s is back to within striking distance of its record high mainly because restaurant stocks are expected to benefit from a stronger discretionary spending backdrop in 2024. Moderating inflation and interest rates would leave more money in the budget for Big Macs and McNuggets. The world’s largest fast food chain could also get a lift from a leisure travel rebound if consumers shift spending towards big ticket vacations and skip pricey dine-in restaurants in favor of the McDonald’s value menu.

Will Chipotle beat Q4 earnings estimates?

Based on the fact that Chipotle Mexican Grill, Inc. (NYSE: CMG) has outperformed Street earnings bogeys in 17 of the last 20 quarters, there’s an above-average chance it will do so again. When the quick-casual chain releases fourth-quarter numbers on February 6th, EPS is expected to come in at $9.63. This would mark the slowest profit growth since the first quarter of 2022 but, as usual, would probably still well outpace the peer average.

Chipotle continues to outpace restaurant peers largely because it has one of the most tech-forward operating models. The company’s delivery and mobile ordering platforms are popular with its younger customer base. Along with the high-quality ingredients and limited-time menu items (like the September 2023 return of Carne Asada), convenient digital tools are making customers glaze over the more expensive pricing.

Automation, another emerging restaurant trend, is another area of focus for Chipotle. Last month, it announced an investment in Greenfield Robotics, a maker of autonomous agricultural robots that promote regenerative farming. The partnership could not only make for more efficient, cost-effective farming methods but also score valuable points with Chipotle’s environmentally conscious base.