The benefits of Ozempic are not just weight loss advocates

Ozempic and GLP-1’s weight loss trend parallels the artificial intelligence (AI) craze that has gone viral mainstream, sending headlines like Novo Nordisk A/S NYSE: NVO AND Nvidia Corp. NASDAQ:NVDA through the roof. While GLP-1 users report amazing weight loss results, such as Oprah Winfrey losing 60 pounds, users continue to report side effects of nausea, vomiting, gastrointestinal illness, and weight return once treatment is stopped.

Many people are looking beyond the medical industry for alternative diets and lifestyles.

Rise of the carnivores

Due to rising costs, many insurers and employers have limited access to these medications. GLP-1 drugs have reignited the trend of weight loss and the search for the perfect diet.

People who don’t want to resort to expensive and potentially harmful GLP-1 drugs have adopted more holistic diets such as the carnivore diet, which involves consuming only animal proteins and fats. Ketogenic diets allow a limited amount of carbohydrates from vegetables. Here are two restaurant stocks benefiting from the carnivore and keto diet trends.

Texas Roadhouse Inc.

Texas Roadhouse Inc. NASDAQ:TXRH is one of the largest casual steakhouse operators in the United States, offering a combination of value and quality in a unique Texas cowboy-style setting. The company operates under the namesake brands Texas Roadhouse Steakhouse and Bubba’s and Jaggers. Its 740 locations in 49 states and 10 foreign countries are company-owned and operated, including approximately 100 franchises.

The steaks are hand-cut and the sides (including bacon bits, croutons and salad dressing) are made from scratch, which sets them apart from competitors who use frozen or pre-made options.

The business also serves chicken and seafood entrees. It has a mobile app and a VIP Club loyalty program, where customers can use points to earn rewards like gift cards. Compete directly with Darden Restaurants Inc. NYSE:DRIwho owns LongHorn Steakhouse.

The results continue to sizzle

On Feb. 15, Texas Roadhouse reported fourth-quarter 2023 earnings per share of $1.08, beating analysts’ estimates by 2 cents. Revenue grew 15.3% year-over-year (YOY) to $1.16 billion, in line with analyst estimates.

Sales at company-owned restaurants increased 9.9% year-over-year and 8.9% year-over-year at franchised locations. Average weekly sales were $141,653, of which $17,793 were takeout sales compared to $130,176, of which $16,414 were takeout sales in the year-ago period.

Margins increased 21.4% year over year to $176.7 million compared to $145.6 million in the year-ago period. The company opened 12 corporate restaurants and seven franchise restaurants in the quarter.

Increase in dividends

The company repurchased 40,787 shares for $4.8 million in the quarter. The board of directors authorized an 11% increase in the dividend with a quarterly cash payment of 61 cents per share. It will be distributed on March 26 to shareholders of record as of the close of business on March 13, 2024.

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Forecast for 2024

Company-owned restaurant comparable sales for the first 50 days of Q1 2024 increased 6.8% year-over-year. The company will implement price increases of 2.2% at the end of March. The company expects positive comparable restaurant sales growth in 2024.

Raw material cost inflation is expected to be around 5%. The store’s week-long growth is expected to be around 8%, including a 2% lead from the 53rd week. Wage and labor inflation is expected to rise 4% to 5%, with total capex spending between $340 million and $350 million.

Jerry Morgan, CEO of Texas Roadhouse, commented: “As we approach 2024, our development process is progressing as planned, with 19 new corporate restaurants under construction. We expect that a more evenly distributed opening schedule will create efficiencies and have a positive impact on weekly store growth. Our strong balance sheet and disciplined capital allocation strategy continue to provide us with the flexibility to fund new store growth and return capital to our shareholders.”

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Daily bull flag breakout

The daily candlestick chart on TXRH illustrates a bullish flag breakout pattern. The flagpole formed on the breakout of the daily market structure low (MSL) through the $120.31 trigger on January 22. Shares rose to a peak of $135.29 ahead of fourth-quarter 2023 earnings.

The strong ratio formed a gap from $145.45, reaching new all-time highs at $152.55. The daily relative strength index rose through the overbought 70 band while hovering around the 79 band. Pullback support levels are at $145.45, $135.29, $130.15 and $120.31 .

Steakhouse in the hinterland

Bloomin’ Brands Inc. NASDAQ: BLMN is a casual dining restaurant operator with four brands: Outback Steakhouse and Fleming’s Prime Steakhouse & Wine Bar, Bonefish Grill and Carrabba’s Italian Grill.

Outback Steakhouse is an Australian-themed steakhouse with a menu of various budget-conscious hand-cut steaks, seafood items, and comfort foods like the famous Bloomin’ Onion Fried Appetizer. Outback has locations in over 19 countries.

As of December 31, 2023, Outback Steakhouse had 688 locations in the United States, of which 562 were company-owned and 126 were franchised. Bloomin’ Brands owns 300 international Outback Steakhouses for a total of 330 internationally. Total company-owned restaurants system-wide is 1,189, with 291 total franchise locations system-wide.

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Glass half full

On November 23, 2023, Bloomin’ Brands reported fourth-quarter 2023 earnings per share of 75 cents, beating analysts’ expectations by 6 cents. Revenue grew 9.1% year-over-year to $1.19 billion versus analysts’ consensus estimates of $1.2 billion.

The company issued lower guidance for the first quarter of 2023 with EPS of 70 cents to 75 cents versus consensus estimates of 93 cents. Comparable U.S. sales are expected to decline 0.5% to 2%. Full-year 2024 EPS is forecast between $2.15 and $2.66 versus consensus estimates of $2.61. The board of directors declared a dividend of 24% per share payable on March 20 to shareholders at the close of business on March 6.

Bloomin’ Brands CEO David Deo said he will spend more money marketing Outback Steakhouse in 2024. The company opened six new domestic restaurants in 2023 and expects to triple that number in 2024.

Deo said the company has welcomed customers who are more mindful of their discretionary budgets: “Our current LTO, a three-course Australian dinner for $16.99, offers the customer great value. We will continue to be mindful of the our approach to overall pricing and discounts. The ‘No Rules, Just Right’ campaign and marketing investment are just the beginning of the work underway at Outback. There will be more to reveal in our strategy at Outback in the coming quarters.”

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Daily symmetrical triangle

The daily candlestick chart on BLMN illustrates a symmetrical triangle pattern composed of a descending upper trendline and an ascending lower trendline. BLMN approaches the ultimate breakout or breakdown when they meet at the apex point. The daily MSL was triggered at $25.01. The pullback support levels are at $25.73, $25, $24.33 and $22.92.

Before you consider Darden restaurants, you’ll want to hear this.

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