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:

• The Softer Side of Jack in the Box
• Nibble on Some Fast-Food Trends