After Chuy's Earnings, Will The Stock Stay Above $30?

In a report published Wednesday, Wunderlich analyst Robert M. Derrington upgraded the rating on

from Hold to Buy, while raising the price target from $24 to $34, after the company reported robust 2Q results. Chuy's reported better-than-expected 2Q results, with EPS up 52 percent to $0.32, driven by better-than-projected revenues and SSS of 3.2 percent. The 19.1 percent revenue growth was supported by 19.6 percent capacity growth and slightly better average weekly sales, or AWS. Analyst Robert Derrington pointed out that the increase in SSS was "aided by menu mix of 3.9%, traffic decline of 0.7%, and dragged by weak patio sales. Menu pricing was 3.5%, designed to offset ACA-related costs and some select protein pressures." The company's strong revenues, along with improved productivity measures and favorable commodity trends, resulted in a 260nps increase in restaurant margins to 21 percent. The company has guided to its H2:15 margins to be "less favorable" than that achieved in H1. The company raised its full-year EPS target to $0.82-$0.85 from $0.76- $0.79, reflecting the strong Q2 and further gains to come. The updated guidance is based on various assumptions including "SSS growth of 2.5% for Q3-Q4, the opening of 10-11 new Chuy's units (back-end loaded), pre-opening cost of $4.2-$4.7mm, effec. tax rate 28%-30%, and diluted shares 16.7-16.8mm," the report mentioned. The EPS estimates for 2015 and 2016 have been raised from $0.80 to $0.86 and from $0.94 to $1.02, respectively. "Factoring continuation of CHUY's recent valuation metrics to our revised higher estimates supports our raised target to $34," Derrington wrote.