BMO Capital Markets Initiates Coverage On Texas Roadhouse Inc.

BMO Capital Markets initiated coverage on Texas Roadhouse Inc. TXRH in a report issued Thursday with a Market Perform rating and $29 price target.

 

Analyst Andrew Strelzik believed that "Texas Roadhouse should generate low double-digit sales growth and at least mid-teens earnings growth for the foreseeable future beginning in 2015.”

 

Strelzik cautioned that “investors should wait for a more attractive entry point, in our view, as Texas Roadhouse likely will fall short of expectations over the next 18 months.”

 

The report noted that the company "is trading at a forward 12-month P/E and EV/EBITDA of 20x and 9.0x-9.5x, respectively, is trading largely in line with its historical average P/E multiple and above its historical average EV/EBITDA multiple (8.3x).”

 

Beef inflation was a significant factor for the company. The report estimated that a 10 percent decline in beef prices “could contribute $25-30 million of profits, 150 basis points to margins, and $0.25 to EPS.”

 

Texas Roadhouse Inc. recently traded at $27.78 Thursday, down 0.82 percent.