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A Few Takeaways From Guggenheim's Restaurant Summit: Darden, Habit, El Pollo And Wingstop

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A Few Takeaways From Guggenheim's Restaurant Summit: Darden, Habit, El Pollo And Wingstop

Guggenheim recently hosted its third annual Emerging Growth Restaurant Summit in Dallas, which reaffirmed a healthy environment for the restaurant sector and reinforces a bullish stance on a handful of stocks.

The Analyst

Guggenheim's Matthew DiFrisco made the following rating and price target changes:

  • Upgrade Wingstop Inc (NASDAQ: WING) from Neutral to Buy with a new $80 price target.
  • Maintain El Pollo LoCo Holdings Inc (NASDAQ: LOCO) at Buy, price target lifted from $14 to $17.
  • Maintain Habit Restaurants Inc (NASDAQ: HABT) at Buy, price target lifted from $15 to $17.
  • Maintain Darden Restaurants, Inc. (NYSE: DRI) at Buy, unchanged $135 price target.

Key Takeaways

Seven management teams spoke at the conference and there was a consistent theme among all management teams of an improving consumer environment, DiFrisco said in a research report. It would be logical to conclude that based on the presentations consumers are undergoing a "modest trade up."

Due to a tight workforce, DiFrisco said all seven management teams also discussed wage pressures of around 5 percent. However, most of the companies aren't rushing to increase menu prices immediately and are instead focused on a "measured" price increase over the longer-term. Construction costs were also cited as a financial concern, but also implies industry growth and supply will remain in check.

Wingstop

  • Near-term catalysts like loaded fries and Cajun fried corn should support a mid-single-digit same-store sales growth through 2019.
  • New delivery options are likely to improve brand awareness and target a broader demographic.
  • A strong domestic and international pipeline of new store opens should support double-digit net development through 2025.

El Pollo And Habit

  • Expectations for a return to positive franchise same-store sales in the back half of 2018 removes the discounted valuation.
  • The firm's $17 price target is based on a 12.5 times multiple on EV/EBITDA.
  • Habit Restaurants' stock should also be valued at 12.5 times 2018 estimated EV/EBITDA.

Darden Restaurants

  • Guggenheim's $135 price target is based on a premium valuation multiple of 14 times 2020 estimated EBITDA.
  • The company's superior management team, market share gains and ongoing momentum justifies a premium valuation.

Related Links:

3 Restaurants That Could See Labor Pressure From Amazon's Wage Increase

BTIG Says Wingstop's Stock Has Gone 'Too Far Too Fast'

Posted-In: Analyst Color Upgrades Price Target Reiteration Restaurants Analyst Ratings Trading Ideas General Best of Benzinga

 

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