Look Out For The Restaurant Industry, Deutsche Bank Says

Deutsche Bank’s analysts Brett Levy and Karen Short have initiated coverage and shared a tremendous amount of knowledge about the food industry;

Among the coverage on 13 restaurant companies, only four were a Buy-Rating:

• McDonald’s Corporation MCD: Rated Buy alongside a price target of $120 and an upside of 23 percent.
• Darden Restaurants, Inc. DRI: Darden, the parent company of Olive Garden, is rated Buy with a price target of $72 and an upside of 11 percent.
• Starbucks Corporation SBUX: Rated Buy along with a price target of $60 and upside of 16 percent.
• Ruth’s Hospitality Group, Inc. RUTH: Rated Buy at a price target of $17 with an upside of 16 percent.

The other nine restaurant companies not fortunate to make the the “Buy list” include:

• Chipotle Mexican Grill, Inc. CMG: Rated Hold with price target of $640, 4 percent upside.
• Buffalo Wild Wings BWLD: Rated Hold with price target $160, 3 percent upside.
• Yum Brands, Inc. YUM: Rated Hold with price target of $90.
• Panera Bread Co PNRA: Rated Hold with price target of $180.
• Texas Roadhouse Inc TXRH: Rated Hold with price target of $36, 2 percent upside.
• Sonic Corporation SONC: Rated Hold with price target of $32, 4 percent upside.
• Zoe’s Kitchen Inc. ZOES: Rated Hold with price target of $33, an upside of 4 percent.
• Bloomin’ Brands Inc. BLMN: Rated Hold with price target of $24, 5 percent upside.
• Del Frisco’s Restaurant Group Inc DFRG: Rated Hold with price target of $19.

The two analysts have also specified vital factors affecting the future of the restaurant industry:

• Growing labor pools pose cost problems due to the focus of wage hikes.
• Low interest rates have improved operating results, allowed restaurants to become more aggressive and issue dividends to shareholders. This may change when the Feds hike interest rates.
• Other issues include macro risks that impact consumer sentiment and spending, growing competition in both traditional restaurants and nontraditional food retailers, changes in government regulations across health and product safety, and increasing wages or rising healthcare costs that will hurt profitability.