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Goldman Grades America's Restaurants; Recommends Buy On Domino's, Starbucks

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Goldman Grades America's Restaurants; Recommends Buy On Domino's, Starbucks
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Goldman Sachs recommends Buying Domino's Pizza, Inc. (NYSE: DPZ) and Starbucks Corporation (NASDAQ: SBUX) ahead of their quarterly earnings.

American restaurants such as Domino's, Starbucks, Chipotle Mexican Grill, Inc. (NYSE: CMG) and Dunkin Brands Group Inc (NASDAQ: DNKN) are expected to report their quarterly numbers on Thursday, July 21.

Domino's

Goldman Sachs expects Domino's to post EPS of $0.96 and Starbucks to earn $0.48. It estimates Chipotle and Dunkin' Brands earnings at $0.46 a share and $0.56 a share, respectively. The consensus estimate calls for EPS of $0.94 for Domino's, $0.49 for Starbucks, $0.91 for Chipotle and $0.56 for Dunkin'.

Related Link: Domino's Gets Goldman's Blessing Heading Into Earnings

For Domino's, Goldman expects 6.9 percent in second quarter U.S. comps, which roughly benchmarks Domino's to about the 150bps deceleration "we expect in 2-year fast food comps." The analyst has a price target of $139 on the pizza place.

"That said, more efficient ad spend could drive upside, with 'dominos car' search volumes suggesting a high ROI on spend and growth to DPZ's website/app reaccelerating in the quarter," analysts including Karen Holthouse wrote in a note.

Starbucks

For Starbucks, the analyst said investors should be focusing on the U.S. comps. Holthouse' price target for Starbucks stands at $73.

Related Link: Investors Should Be Watching Starbucks' U.S. Comps

Chipotle

For the Neutral-rated Chipotle, Holthouse sees risk biased to the downside into the quarter.

"We do not believe CMG saw a material improvement in the top-line trend post food safety concerns in 2Q, and believe our 2Q comp estimate of (22.7 percent) is roughly marked to investor expectations," the analyst highlighted.

"The bigger focus may be on the QTD trend; however, a lack of customer data makes it difficult to tie Chiptopia/chorizo benefits into a longer-term tailwind," Holthouse continued.

In addition, Holthouse continues to see risk to second half consensus numbers on the back of a slower than expected top-line trajectory, and in particular, higher-than-expected marketing/promotional expenses. Holthouse has a price target of $490 on the stock.

Related Link: Chipotle Shares Higher Following CLSA Upgrade To Outperform

Dunkin'

For the Neutral-rated Dunkin' Brands, Holthouse noted that second-quarter results should offer a better read on the underlying comp trend after weather provided a 90bps tailwind to first quarter comps.

"We continue to see price increases creating risk to the traffic outlook, and it appears unlikely a national Coolatta promotion drove a material traffic increase. Technology also remains a focus, although our analysis of 'On the Go' functionality skews negatively," Holthouse added.

The analyst has a price target of $45 on the shares.

At Time Of Writing...

  • Domino's modestly rose 0.03 percent to $135.59.
  • Starbucks were down 0.33 percent to $56.73.
  • Chipotle gained 1.53 percent to $415.00.
  • Dunkin' Brands slipped 0.84 percent to $46.25.

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Latest Ratings for CMG

DateFirmActionFromTo
Nov 2016GuggenheimDowngradesNeutralSell
Oct 2016Goldman SachsMaintainsNeutral
Oct 2016Credit SuisseDowngradesOutperformNeutral

View More Analyst Ratings for CMG
View the Latest Analyst Ratings

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