McDonald's and Other Restaurant Stocks Recommended by Deutsche Bank (MCD)
Analysts at Deutsche Bank (NYSE: DB) see restaurant stocks continuing to benefit from the economic recovery and moderating food costs. The sector easily outperformed the S&P 500 so far in 2013, after a stronger second quarter.
Buffalo Wild Wings (NASDAQ: BWLD), Del Frisco's Restaurant (NASDAQ: DFRG), McDonald's (NYSE: MCD) and Panera Bread (NASDAQ: PNRA) continue to be the top picks from the Deutsche Bank analysts. We take a glance at how these four stocks have fared and what analysts expect below.
Note that the analysts also recommended coffee shop operator and coffee distributor Starbucks (NASDAQ: SBUX), in part for its expanding footprint in China and the rest of Asia.
Buffalo Wild Wings
This bar and grill operator and franchiser is headquartered in Minneapolis. It sports a market capitalization of about $1.8 billion but offers no dividend. The price-to-earnings (P/E) ratio is higher than the industry average, but the long-term earnings per share (EPS) growth forecast is more than 18 percent. The return on equity is almost 15 percent. And short interest is more than 13 percent of the float.
Seven of the 22 analysts surveyed by Thomson/First Call who follow this stock rate it at Strong Buy, and four others also recommend buying shares. But the mean price target, or where analysts expect the share price to go, indicates only about four percent potential upside. The Deutsche Bank target is about five percent higher than the current share price.
Shares of Buffalo Wild Wings are more than 36 percent higher year-to-date and trading near a multiyear high. Over the past six months, the stock has outperformed the broader markets, as well as McDonald's and Panera Bread.
Del Frisco's Restaurant
This Southlake, Texas-based steakhouse operator offers no dividend either. Its market cap is about $515 million. The long-term EPS growth forecast is more than 15 percent, but the P/E ratio is higher than the industry average. The return on equity is about 11 percent. Short interest is less than two percent of the float.
All five of the analysts surveyed recommend buying Del Frisco's shares, with two of them rating the stock at Strong Buy. But the mean price target is only marginally higher than the current share price. The Deutsche Bank price target represents more than five percent upside potential.
Shares are trading almost 29 percent higher than they were at the beginning of the year and reached a 52-week high last week. But over the past six months, this stock has underperformed competitor Ruth's Hospitality (NASDAQ: RUTH), though it outperformed the broader markets.
This fast-food goliath is based in Oak Brook, Illinois, and has a market cap of about $100 billion. Its dividend yield is about 3.1 percent. Its P/E ratio is lower than the industry average but the long-term EPS growth forecast is less than nine percent. The number of shares sold short represents about one percent of the company's float.
Seventeen of the 29 analysts polled recommend buying shares, with five on those rating the stock at Strong Buy. The analysts believe shares have a little head room, as their price target is more than six percent higher than the current share price. Deutsche Bank sees more than nine percent potential upside.
The share price is up 11 percent year-to-date, though shares have faced resistance at about $100 for more than a month. The stock has narrowly underperformed the broader markets over the past six months, but it has outperformed competitor Yum! Brands (NYSE: YUM).
This St. Louis-based bakery and cafe operator has a more than $5 billion market cap, but it does not offer a dividend. The P/E ratio is a higher than the industry average, and the long-term EPS growth forecast is almost 19 percent. The return on equity is more than 22 percent. Short interest is more than seven percent of the float.
Out of 24 surveyed analysts, 15 recommend buying shares, with seven of them rating the stock at Strong Buy. The consensus price target is only about four percent higher than the current share price, and the Deutsche Bank target only marginally higher than the consensus one.
Shares are trading more than 16 percent higher than at the beginning of the year. But the share price is still recovering from a more than six percent pullback in June. Over the past six months, the stock has narrowly underperformed competitor Einstein Noah Restaurant Group (NASDAQ: BAGL), but it has outperformed the broader markets.
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