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Investing.com -- U.S. restaurant stocks better positioned heading into 2026 after a difficult 2025, helped by easier comps, expected stimulus benefits and more attractive valuations, though macro pressures on lower income consumers are likely to persist.
UBS upgradedBrinker Internationalto Buy, pointing to strong same store sales momentum and earnings upside, and downgradedSweetgreento Neutral, saying valuation already reflects ongoing sales and margin challenges.Get premium news and insight, AI stock picks, and deep research tools by upgrading to InvestingPro-get 55% off todayUBS said industry same store sales should modestly improve next year but remain in the low single digit range, with traffic still likely negative.Growth will be driven more by traffic share gains and brand specific drivers than by pricing, as discounting remains elevated and consumers stay value focused.
UBS said stimulus from the One Big Beautiful Bill Act should provide a lift to restaurant sales, with upper income consumers expected to benefit the most.Casual dining and fast casual chains are likely to see the biggest boost based on their customer mix, UBS said. However, pressures on lower income, younger and Hispanic consumers are expected to linger and could weigh on demand in the second half of 2026.
The brokerage said margins should improve for many restaurants next year due to easier comparisons and better sales, though risks remain from limited pricing power, higher discounting and food inflation.UBS expects food inflation in the low to mid single digit range and labor inflation to remain stable.
UBS said restaurant sector valuations still look discounted versus history, trading at about a 15% discount to the S&P 500 compared with a 10 year average premium, even after a recent rerating on optimism for 2026.
UBS expects fast casual to improve in 2026 after a weak 2025, which it attributed mainly to cyclical consumer pressure rather than structural issues.Casual dining momentum could continue, supported by market share gains and potential stimulus benefits. Quick service restaurants are likely to remain split between winners and losers as lower income consumers remain under pressure.
UBS namedDutch BrosandChipotle Mexican Grillas its top picks on strong growth opportunities and potential sales catalysts.
