Stick With Fast Food

It's no secret that sky-high energy prices and food inflation are putting a hurt on consumer pocketbooks these days. Given the financial pinch, many families are eating out less and trading down to more affordable fare. That trend has favored the fast-food operators over the casual-dining crowd.

A look at a stock chart of key industry players is quite revealing: Fast food is leading the pack as share performance of McDonald's (NYSE: MCD  ) , Burger King (NYSE: BKC  ) , and Yum! Brands (NYSE: YUM  ) are firmly ahead of the S&P over the past year. In stark contrast, sit-down chains such as Darden (NYSE: DRI  ) , known best for its Red Lobster and Olive Garden chains, and P.F. Chang's (Nasdaq: PFCB  ) are well below the market and have traded down more than 20% in the past year as operating results have been poor.

Demonstrating that people are seeking less-expensive alternatives for dining out and that price has become the key differentiator in our economic malaise, fellow Fool Selena Maranjian recently highlighted some tasty fast-food trends. Mickey D's has been a primary beneficiary of the current tendency -- a combination of menu innovation, service, and low cost have the fast-food giant firing on all cylinders these days.

Given the favorable trends for quick-serve restaurants, I see a couple of opportunities for value-minded investors. Drive-in restaurant operator Sonic (Nasdaq: SONC  ) posted third-quarter results that fell short of analyst projections. Sonic earnings declined by around 10% for a diluted per-share showing of $0.28, versus $0.31 last year, and same-store sales declined by 0.4%. The market reacted to the bad news by causing share prices to fall by more than 10%. But Sonic is still projecting full-year earnings growth of 4%-6% and has a long-standing history of positive same-store sales growth from a steady stream of new menu rollouts. Patrons also like its drive-in locations, which serve as a differentiator in a crowded industry. Sonic's price drop could be a good opportunity for investors to buy.

The other notable opportunity is Motley Fool Hidden Gems Pay Dirt pick Jack in the Box (NYSE: JBX  ) , which also recently posted softer near-term trends but has plenty of potential as it expands out of Texas and California, sells company-owned stores to franchisees, and expands its successful Qdoba chain of fast-food Mexican restaurants. Even with the near-term struggles, I would expect Sonic and Jack to hold up well and see plenty of upside potential over the long haul.

For related Foolishness:

Fool contributor Ryan Fuhrmann is long shares of Jack in the Box but has no financial interest in any other company mentioned. Feel free to email him with feedback or to further discuss any companies mentioned here. The Fool has an ironclad disclosure policy.

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