Market Overview

Texas Roadhouse's Upside Is Priced In, BTIG Says In Downgrade

Texas Roadhouse's Upside Is Priced In, BTIG Says In Downgrade
Related TXRH
64 Biggest Movers From Yesterday
55 Stocks Moving In Tuesday's Mid-Day Session

BTIG Research downgraded Texas Roadhouse (NASDAQ: TXRH) on the basis of both the restaurant chain's earnings and its valuation.

The Analysts

Analyst Peter Saleh downgraded Texas Roadhouse from Buy to Neutral.

The Thesis

Multiple expansion seems unlikely given Texas Roadhouse's heightened valuation, Saleh said in the downgrade note. (See his track record here.) 

Continued mid-single digit labor inflation should likely offset strong sales, moderating the company's operating profit growth, the analyst said. 

“Persistent labor inflation has been a challenge for Texas Roadhouse in recent years, leading to several earnings shortfalls in recent quarters despite incredibly strong sales trends. All signs indicate that wage inflation will continue at its current mid-single digit pace for the foreseeable future, driven by mandated wage increases, limited labor availability and planned wage/benefit increases,” Saleh said.

The company’s modest menu pricing should continue into 2019, the analyst said. This dynamic should continue to pressure restaurant margins going forward, he said. 

“While there may be some upside to comp/traffic expectations given the solid industry trends of recent months, we believe that any potential upside is more than reflected in the current valuation.”

Price Action

Texas Roadhouse shares were 1.09 percent at $71.65 at the time of publication Thursday.

Related Links:

3 Reasons Why RBC Craves Texas Roadhouse's Stock

Texas Roadhouse's Upside Potential Is 'Limited,' JPMorgan Says In Downgrade

Photo by Dwight Burdette/Wikimedia. 

Latest Ratings for TXRH

Oct 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Oct 2018BMO CapitalMaintainsUnderperformUnderperform
Oct 2018BarclaysMaintainsOverweightOverweight

View More Analyst Ratings for TXRH
View the Latest Analyst Ratings

Posted-In: btig Peter SalehAnalyst Color Downgrades Restaurants Analyst Ratings Media General Best of Benzinga


Related Articles (TXRH)

View Comments and Join the Discussion!

Latest Ratings

XECImperial CapitalDowngrades35.0
SSTIImperial CapitalUpgrades49.0
AVDLoop CapitalUpgrades29.0
FCREYDeutsche BankUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Uncertainty Drives JMP Securities' Wageworks Downgrade

DEA Plant Eradication Decline, As Processed Cannabis Seizures Hit A Record High