Chipotle Mexican Grill CMG, Dunkin' Brands DNKN, Panera Bread PNRA and Starbucks SBUX were among the stocks favored in a recent research report from Baird analysts that focused on restaurant stocks that are now leading the otherwise disappointing consumer discretionary sector.
The analysts see healthy earnings growth in the top names for the rest of the year, due in part to encouraging comparison numbers, manageable costs and weaker food price inflation. Here is a quick look at how these four stocks in particular have fared and what analysts expect from them.
Chipotle Mexican Grill
The fast-casual leader has been in the news recently both for raising its prices and for asking customers not to bring guns into its stores. The Denver-based company has a market capitalization above $18 billion. Its long-term earnings per share (EPS) growth forecast is more than 21 percent, and its return on equity is more than 22 percent.
Of the 28 analysts polled by Thomson/First Call, 19 recommend buying shares, with 10 of them rating the stock at Strong Buy. The mean price target, or where analysts expect the share price to go, is only about four percent higher than the current share price, but Baird's price target signals more than nine percent potential upside.
The share price ended Friday up more than 16 percent in the past month, rising well above the 50-day moving average, and it is more than 12 percent higher than at the beginning of the year. Over the past six months, the stock outperformed the others featured here, and it was the only one of the four to outperform the broader markets.
Dunkin' Brands
Like Starbucks, Dunkin' is looking to expand its lunch menu, and this year it will open its first locations in California in more than a decade. The Boston area-based chain sports a market cap of more than $4 billion and offers a dividend yield near 2.0 percent. Its long-term EPS growth forecast is more than 15 percent.
Eight of the 22 analysts surveyed rate the stock at Strong Buy, while another four also recommend buying shares. But analysts do see plenty of headroom for shares, as their mean price target is more than 15 percent higher than the current share price. Baird sees more than 18 percent upside potential.
Shares retreated more than four percent in the past week, and the stock is down almost seven percent year to date. The 50-day and 200-day moving averages formed a death cross in late May. Over the past six months, the stock has underperformed competitors McDonald's and Starbucks.
Panera Bread
This St. Louis-based company recently announced a new share repurchase program and just secured a loan to funds its expansion efforts. It has a market cap of near $4 billion. The long-term EPS growth forecast is about 17 percent, and its return on equity is more than 24 percent.
For at least three months, the consensus recommendation of analysts has been to hold shares of Panera, but more analysts now rate it a Buy than did two months ago. They see more than 11 percent upside potential, relative to the current share price. But a move to the Baird price target would be a gain of more than 24 percent.
Shares pulled back almost five percent last week and ended Friday less than two bucks north of the 52-week low. The share price is more than 14 percent lower than at the beginning of the year. The stock has not only underperformed Chipotle and Starbucks over the past six months, but the broader markets as well.
Starbucks
Starbucks has debuted its first La Boulange Cafe in Los Angeles, and it began offering wireless phone charging at many Starbucks locations. The Seattle-based company has a market cap of more than $56 billion and a dividend yield around 1.5 percent. The long-term EPS growth forecast is about 19 percent.
All but six of the 28 analysts surveyed recommend buying shares, with 15 of them rating the stock at Strong Buy. A move to the analysts' mean price target would represent about a 15 percent gain for shareholders. The Baird price target is about 17 percent higher than the current share price.
The share price is up around five percent in the past month but still down about the same amount relative to the beginning of the year. The stock has narrowly outperformed Dunkin' over the past six months, but it has also underperformed McDonald's and the broader markets in that time.
At the time of this writing, the author had no position in the mentioned equities.
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