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

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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

Wedbush said it continues to favor Jack in the Box Inc. (NASDAQ: JACK) most due to the confidence in management’s ability to meet or exceed EPS expectations in a muted sales environment. Analyst Nick Setyan sees refranchising, G&A opportunities and share repurchases as drivers of EPS in-line to above guidance.

Setyan also favors Starbucks Corporation (NASDAQ: SBUX) and Del Taco Restaurants Inc (NASDAQ: 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 (NASDAQ: 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. (NASDAQ: BJRI) and Buffalo Wild Wings (NASDAQ: BWLD). Further, he sees Shake Shack Inc (NYSE: SHAK)’s comps and AUVs to be pressured ahead of current expectations, leading to disappointing EBITDA growth.

For Chipotle Mexican Grill, Inc. (NYSE: 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

Meanwhile, Setyan remains on sidelines on Wendys Co (NASDAQ: WEN), saying increased visibility into fundamental drivers of EBITDA growth reacceleration in 2017 and beyond is necessary for further multiple expansion.

Ratings And Price Targets

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

Company

Rating

Price Target

BJ's Restaurants

Underperform

$31.50

Buffalo Wild Wings

Neutral

$155.00

Chuy's Holdings Inc (NASDAQ: CHUY)

Outperform

$31.00

Chipotle Mexican Grill

Neutral

$400.00

Del Taco Outperform $17.00

Denny's Corporation (NASDAQ: DENN)

Outperform

$14.00

Dunkin Brands Group Inc (NASDAQ: DNKN)

Neutral

$49.00

Fiesta Restaurant Group Inc (NASDAQ: FRGI)

Outperform

$32

Habit Restaurants Inc (NASDAQ: HABT)

Outperform

$20.00

Kona Grill Inc (NASDAQ: KONA)

Outperform

$12.00

Noodles & Co (NASDAQ: NDLS)

Neutral

$4.50

Popeyes Louisiana Kitchen Inc (NASDAQ: PLKI)

Outperform

$72.00

Panera Bread

Neutral

$220.00

Shake Shack

Underperform

$30.00

Wendy's 

Neutral

$14.00

Wingstop Inc (NASDAQ: WING)

Outperform

$36.00

 

Related Articles (BJRI + BWLD)

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