Wedbush Previews Q3 Earnings In Restaurant Group: Likes Panera, Starbucks, Del Taco, Cautious On Buffalo Wild Wings, Chipotle

In a report published Friday, Wedbush analyst Nick Setyan previewed the Restaurant sector and offered his top picks heading into earnings season.

Setyan noted his recent checks at Panera (Outperform rated, $250 price target) indicated "continued 2.0 traction," with a higher number of units up double-digits year over year. The analyst also observed an increasing number of stores that moved their catering facilities off-site which should result in increased retail-only productivity. In addition, comp momentum likely continued into the third quarter and fourth quarter-to-date period, suggesting the company will report an in-line to above consensus comp of 3.4 percent. Setyan continued that he is expecting Starbucks (Outperform rated, $70 price target) to show same-store sales growth momentum (mid-to-high single-digit) while his checks suggested a North America comp as high as eight percent.

Setyan stated that while he expects Buffalo Wild Wings (Neutral rated, $190 price target) to report "solid" same-store sales growth, consensus earnings per share estimates may be "tough to achieve" even with comp upside. The analyst also added that the consensus estimate is calling for 27 percent earnings per share growth in 2016 and this may be a "tough hurdle" without an incremental benefit from commodities. Finally, Setyan is expecting Chipotle Mexican Grill (Neutral rated, $740 price target) to report an earnings per share beat given lower food costs, his checks indicated that the mid-quarter comp momentum (boosted by promotional activity) did not last in September and October. As such, the analyst warned that the company's comps "may prove disappointing" to some investors.