Ignite Restaurant Group's Not A Sure Thing, UBS Downgrades To Sell

• Ignite Restaurant Group Inc IRG shares have declined by 45 percent year-to-date.
• UBS analyst Keith Siegner downgraded the rating on the company from Neutral to Sell, while reducing the price target from $4 to $3.50.
• Limited visibility into Joe’s recovery and multiple years of negative earnings ahead are likely to restrict any upward movement in the stock.

Analyst Keith Siegner said that although the casual dining industry trends were improving, Joe’s continued to post disappointing results, indicating limited visibility into the brand’s recovery.

Ignite Restaurant will likely remain in negative EPS territory for several more years, unless its “top line results inflect & sales turn solidly positive,” Siegner added.

In the report UBS noted, “Joe's might not see positive traffic for the next several years. Unless top line results improve significantly and sales return to solidly positive, further productivity and margin gains will fail to generate much earnings growth.”

Siegner said that if the brand was unable to “effectively drive traffic and turnaround sales,” challenges would likely persist, limiting any upside to the company’s shares even at the current levels.

Ignite Restaurant could bear the current estimates only by achieving a sooner-than-expected sales turnaround at Joe’s and better profitability through improved G&A efficiencies. “Sale of businesses could also drive valuation upside to our current PT,” the report added.