What happened

Shares of Texas Roadhouse (NASDAQ:TXRH), BJ's Restaurants (NASDAQ:BJRI), The Cheesecake Factory (NASDAQ:CAKE), and Darden Restaurants (NYSE:DRI) were all jumping more than 10% Monday morning as the S&P 500 and Dow surged higher and investors heard some positive COVID-19 news from overseas.

So what

Italy reported its slowest rise in deaths in two weeks, and France and Spain also noted a deceleration in deaths, giving some glimmer of hope that the world is taking the right steps to get the COVID-19 pandemic under control. Despite positive news overseas, it's certainly a gloomy time for U.S. restaurant companies and their investors. As UBS analysts recently noted, "For casual dining, a continued down [approximately] 70-to-80% sales environment would provide insufficient cash flow to be viable for more than one-to-two months."

The harsh truth is that many restaurant companies aren't prepared for such an immediate revenue plunge, and it has companies doing anything they can to weather the storm. Cheesecake Factory has temporarily closed stores, furloughed thousands of employees, drawn an additional $90 million from its revolving credit facility, and notified its landlords it would withhold April rent. The company also said March comparable-restaurant sales declined 46%, due to COVID-19.

Steak on a plate with a glass of wine

Image source: Getty Images.

Texas Roadhouse also made moves to expand its To-Go program with curbside and drive-up options, to help offset limited or no in-restaurant business. Management bolstered its cash position by drawing $190 million from its revolving credit facility, and has an option to increase its credit facility by another $200 million.

BJ's Restaurants took extra steps to maximize liquidity by stopping all capital spending, delaying or canceling new restaurant openings in 2020, and drawing the remaining amount under its $250 million line of credit.

Darden Restaurants suspended its quarterly cash dividend and withdrew its 2020 financial guidance, but also noted that it has roughly $1 billion cash on hand and should be well positioned to weather current market conditions.

Now what

^SPX Chart

^SPX data by YCharts.

While social distancing has put financial pressure on retail, transportation, and entertainment stocks (and let's not forget the worst could be yet to come), these four restaurant stocks have rebounded slowly from recent lows. There appeared to be some rebalancing in the stock market Monday, as a beaten-down restaurant industry spiked and a consumer staples group that has performed better over recent weeks largely traded flat.

It's important to note that while markets will almost certainly rebound from COVID-19 and its economic impact, not all companies will be able to weather the storm. When hunting for oversold stocks, be sure to search out companies with strong balance sheets and liquidity, and keep a long-term mindset.