Which Companies Could Avian Flu Hurt The Most?
In a report published Thursday, Wunderlich analyst Robert Derrington discussed which companies faces the most risk from the Avian Flu epidemic.
Derrington cited commodity experts at the American Restaurant Association (ARA) who noted that further risks continue. The organization suggested that it may be "later rather than sooner" before the egg market stabilizes as egg prices will remain volatility through the coming months and could rise by as much as 50 percent before year end. The price of a dozen large eggs has spiked recently as the analyst observed a carton selling for around $2.09, up 87 percent since ARA's April 16 report, and up 67 percent year-over-year.
Moreover, poultry broiler and chicken wing prices could be more at risk later this fall. The analyst did note, however, that so far only 0.8 percent of birds that were destroyed are broilers. In addition, the ARA expects chicken wing prices to average $1.73 per pound, approximately 17 percent higher than in 2014.
"We believe the risk of higher egg prices to cost of goods sold (COGS) for most companies in our research universe currently appears ‘manageable' given offsetting lower food inflation for selected items (like pork, bacon, grains, dairy, etc) combined with some modest pricing," Derrington wrote. "However, while we currently have no change to any estimates for companies in our research universe, we will remain vigilant for such."
Who Is At The Most Risk?
Derrington noted that restaurants that sell breakfast (including eggs) include Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL) (Hold rated, $165 price target), Jack in the Box Inc. (NASDAQ: JACK) (Buy rated, $110 price target) and Sonic Corporation (NASDAQ: SONC) (Buy rated, $39 price target).
In the event of an egg shortage restaurants that produce baked goods could be negatively impacted. The companies Derrington singled out include Panera Bread Co (NASDAQ: PNRA) (Hold rated, $185 price target) and Cheesecake Factory Inc (NASDAQ: CAKE) (Hold rated, $58 price target).
Finally, companies that could be affected by the Avian Flu spreading to broiler chickens include Buffalo Wild Wings (NASDAQ: BWLD) (Buy rated, $208 price target) and Chipotle Mexican Grill, Inc. (NYSE: CMG) (Hold rated, $680 price target).
Latest Ratings for CMG
|Oct 2016||Goldman Sachs||Maintains||Neutral|
|Oct 2016||Credit Suisse||Downgrades||Outperform||Neutral|
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