The U.S. restaurant industry gained momentum at the start of 2016 on the back of improving consumer spending patterns, which in turn were positively influenced by rising wages and cheaper fuel. Further, the GDP numbers for the fourth quarter of 2015 validate that consumer spending power has increased significantly since 2014 levels. With eating-out usually directly proportional to consumers’ disposable income, restaurant sales are projected to rise further in 2016.

Higher purchasing power and the willingness to spend bode well for the consumer discretionary sector, of which restaurants are a part. According to the industry forecast for 2016, released by the National Restaurant Association (NRA) earlier this month, sales at restaurants are projected to see an upswing this year. The NRA estimates restaurant sales will touch $782.7 billion in 2016.

The Restaurant Performance Index (RPI) that tracks the strength and outlook for U.S. restaurants came in at 100.6 for Jan 2016, up 0.8% from the prior month’s level of 99.7, according to the National Restaurant Association. The RPI is designed to measure the condition of the restaurant industry in relation to a steady-state level of 100. Index values above 100 reflect key industry indicators in a stage of expansion, while index values below 100 represent a phase of contraction for the same.

Our Choices

The rosy forecast ahead for restaurants in 2016 is supported by the industry’s recent projections. At this juncture, adding restaurant stocks to your portfolio might as well make for a prudent option.

While making the right choice from a large gamut of stocks can be quite a task, our Zacks Stock Screener comes in handy for this purpose. We hereby shortlist 4 stocks that have delivered a positive earnings surprise in the last quarter and currently flaunt a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy), and can thus prove to be assets for your investment portfolio.

Red Robin Gourmet Burgers Inc. (RRGB – Analyst Report) is a full-service casual dining restaurant chain (named Red Robin Gourmet Burgers) that serves a wide range of burgers, sandwiches and entrées, catering to both non-vegetarian and vegetarian palates. The company also runs limited service non-traditional prototype restaurants, under the brand Red Robin’s Burger Works.