Wedbush Reiterates Outperform, $38 Target On Chuy's Following Strong Q4 Checks

• Chuy's Holdings Inc CHUY shares have lost 2 percent since December 7.
• Wedbush’s Nick Setyan maintained an Outperform rating on the company, with a price target of $38.
• There is upside to the expectations for 2015 and 2016, Setyan stated.

Recent checks indicate about 4 percent SSS growth in Q4, significantly ahead of the current consensus estimate of 2.6 percent, analyst Nick Setyan said. The Q4 SSS growth estimate has been raised from 2.5 percent to 3.5 percent. The EPS estimate for the quarter has been raised from $0.13 to $0.14.

“We noted broad-based strength across all geographies and classes of openings, with TX showing no signs of deceleration. Unlike in Q3, we noted no meaningful divergence between Texas and non-Texas locations, or among different classes (years) of openings,” Setyan wrote.

Provided current trends continue, the non-Texas units could contribute 1-2 percent to SSS growth per quarter in 2016.

There could be upward revisions to current 2016 estimates, in view of continued focus on cost controls, a favorable food cost environment, “presence in states where labor headwinds are likely to trail other states, and a declining mix of non-comp units as a percent of total units,” the analyst said.

The EPS estimates for 2015 and 2016 have been raised from $0.89 to $0.90 and from $1.02 to $1.05, respectively. Longer-term, Chuy's appears to be poised for annual EPS growth of 20 percent, Setyan commented.