BMO Capital Markets Issues Restaurant Report, Initiates Ratings

BMO Capital Markets issued a sector comment on restaurants Thursday. The report initiated coverage and ratings for several companies.

Analyst Andrew Strelzik highlighted in his report that "steak and bar & grill concepts are the bright spots in the lackluster casual dining sub-segment” with steak “the only food food segment in casual dining to grow traffic in the last two to three years."

Bar & grills were seen as "accelerating outperformance of casual dining" and this created "an attractive outlook. Outperformance of casual dining has accelerated to 240 basis points (bps) from 100 bps over the last two to three years."

Strelzik noted that "commodity deflation creates significant margin expansion opportunity, while labor headwinds should remain manageable."

The report concluded that “differentiation is key to long-term concept success as casual dining is increasingly commoditized and as fast casual becomes more crowded."

Among the companies discussed in the report, several received Outperform ratings while the remainder were rated Market Perform, see below.

Leading the sector Friday afternoon was Noodles & Co., up 1.92 percent while Chuy’s Holdings fell 4.64 percent.

Outperform

Bloomin’ Brands Inc. BLMN, Buffalo Wild Wings BWLD, Noodles & Co. NDLS.

Market Perform

Brinker International Inc. EAT, Chipotle CMG, Chuy’s  Holdings Inc. CHUY, Darden Restaurants, Inc. DRI, Panera Bread Co. PNRA, Texas Roadhouse Inc. TXRH.