Restaurants Face Comps Headwind In FY15, According To Wunderlich

Casual restaurants will hit increasing headwinds in posting year-over-year growth as the current economic recovery grows older, an analyst said Monday ahead of a raft of earnings reports.

Same-store sales growth slowed in the industry on average to 0.8 percent in March, from more than 6 percent in January, said Wunderlich's Robert M. Derrington, who cited an industry survey by Black Box Intelligence, a unit of TDn2K.

Relatively easy year-over-year comparisons "will evaporate sequentially over the next 12 months," Derrington said, offering less support for same-store sales growth.

Companies with a potential to beat expectations are in the Derrington's continued favor.

The analyst maintained Buy ratings on Red Robin Gourmet Burgers, Inc. RRGB, Sonic Corporation SONC, Jack in the Box Inc. JACK and Buffalo Wild Wings BWLD.

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But Derrington maintained Hold ratings on at least four companies in the sector: Brinker International, Inc. EAT, Chipotle Mexican Grill, Inc. CMG, Cheesecake Factory Inc CAKE and BJ's Restaurants, Inc. BJRI.

Brinker and Chipotle are each slated to post results Tuesday, with each facing a slowdown in growth.

Although Brinker beat expectations in each of the past two quarters, its full-year forecast is unchanged -- a move that Derrington said "telegraphs some headwinds" in the second half.

Along with its expected slowdown, Chipotle continues to trade at a premium relative to its peers, and Derrington called the shares "fairly valued."

Cheesecake, with results slated for Wednesday, has missed earnings expectations in eight of the past 10 quarters, while BJ's same-store sales growth will slow "as they lap stiffening comparisons through 2015," according to Derrington.