Q4 Restaurant Review: Wedbush Favors Jack In The Box, Starbucks

Restaurant companies are set to report their fourth-quarter financial results in challenging industry conditions dominated by tough competition and continued weakness in Texas, which in turn are weighing on same-store sales.

Favorites

Setyan also favors Starbucks Corporation SBUX and Del Taco Restaurants Inc TACO given their defensive nature with de-risked near-term top lines and medium-term comp and margin drivers.

Out Of Favor

On the flip side, the analyst is incrementally cautious on Panera Bread Co PNRA, citing unfavorable risk/reward and heightened expectations of strong go-forward comps.

“Based on our checks, we no longer believe go forward expectations are as safe,” Setyan wrote in a note.

In addition, Setyan expects a disappointing print and weak 2017 outlook from both BJ's Restaurants, Inc. BJRI and Buffalo Wild Wings BWLD. Further, he sees Shake Shack Inc SHAK’s comps and AUVs to be pressured ahead of current expectations, leading to disappointing EBITDA growth.

For Chipotle Mexican Grill, Inc. CMG, the analyst predicts below consensus results, with margins likely to remain under pressure in 2017. That said, Wedbush believes Chipotle’s focus on margins at current sales run rates is poised to benefit 2018.

Sidelined

Ratings And Price Targets

Following are the ratings and price target of various restaurant stocks covered by Wedbush: