It has been a relatively good year for food and drinks investors, as the Dow Jones U.S. Restaurant & Bars Index has climbed 8.3% so far in 2023. Moreover, over the last 12 months, the index has increased 14%. Among the trends that have helped the sector are a strong labor market and the desire to get out of the house and enjoy life after the lockdowns that were imposed during the pandemic.

While the post-lockdown, outside-of-the-house spree is likely to ebb going forward, the labor market remains strong, while inflation has slowed, supply chains have improved, and it has become somewhat easier to find low-skilled workers. As a result of the latter three trends, restaurants’ profit margins are likely to climb going forward.

Here are three restaurant stocks that reported strong second-quarter results, have been rallying recently, and look poised to climb further going forward.

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Restaurant Brands International (QSR)

Restaurant Brands International (US:QSR), the owner of Burger King and Popeye’s Chicken, on Aug. 8 reported that Q2 sales had climbed 8.5% compared to the same period a year earlier, while its global comparable sales jumped a very strong 10% year-over-year. Finally, its earnings per share, excluding certain items, increased 6.6% YOY to 85 cents.

In past columns, I’ve noted that Restaurant Brands late last year recruited former Domino’s Pizza (US:DPZ) CEO Patrick Doyle as its executive chairman. Doyle was able to turn around DPZ, and it looks like he’s doing the same with Restaurant Brands.

Also noteworthy is that QSR has elevated Quality and Momentum scores of 60.3 and 63.39, respectively, on Fintel’s quant dashboards.The shares have climbed 20% since March 10. A slew of analysts have also reiterated their ‘outperform’ recommendations on the shares.

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El Pollo Loco (LOCO)

El Pollo Loco (US:LOCO), which specializes in Mexican-style grilled chicken, has climbed about 8% since Aug. 4.

And the stock’s put/call ratio is fairly bullish, coming in at 0.64, 0.71, and 0.72, respectively on Aug. 8, Aug. 7, and Aug. 4.

Further, showing confidence in its own shares, LOCO agreed to buy back 1.5 million shares of its own stock for $10.63 per share from one of its largest shareholders. On Fintel’s Value dashboard, which ranks companies based on their relative valuation, the shares garner a score of 77.68.

Last quarter, LOCO’s “system-wide comparable restaurant sales” fell 3.4% versus the same period a year earlier as the company faced a difficult comparison due to a popular promotion that it instituted during Q2 of 2022.

But in the four weeks that ended on July 26, LOCO’s comparable sales growth came in at 1.8%, indicating that its sales growth has returned.

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Domino’s Pizza (DPZ)

The aforementioned Domino’s Pizza (US:DPZ) reported strong Q2 financial results on July 24, as its retail sales jumped 5.8% year-over-year, excluding foreign currency fluctuations. Even more impressively, its EPS climbed 9.2% versus the same period a year earlier. Since June 1, DPZ has soared about 25%.

On Fintel’s quant dashboards, DPZ stock gets very high Quality and Momentum scores of 88.64 and 85.85, respectively.

Also noteworthy is that Domino’s recently unveiled a partnership with Uber’s (US:UBER) Uber Eats, an agreement that should help it reach many more millennials, as the pizza giant fends off rival Pizza Hut, owned by Yum! Brands (US:YUM), for dominance in that key demographic.

This article originally appeared on Fintel

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