Market Overview

Wells Fargo Raises Restaurant Price Targets Ahead Of Q3 Reports

Wells Fargo Raises Restaurant Price Targets Ahead Of Q3 Reports

Wells Fargo is adjusting price targets ahead of the restaurant sector's earnings season.

The Analyst

Wells Fargo's Jon Tower:

  • Maintained a Market Perform on Chipotle Mexican Grill, Inc. (NYSE: CMG) with a price target lifted from $415 to $418.
  • Maintained a Market Perform on Dunkin Brands Group Inc (NASDAQ: DNKN) with a price target lifted from $66 to $67.
  • Maintained an Outperform on Mcdonald's Corp (NYSE: MCD) with an unchanged $185 price target.
  • Maintained a Market Perform on Restaurant Brands International Inc (NYSE: QSR) with a price target lifted from $63 to $69.

The Thesis

The risk-reward profiles of quick service restaurants are more attractive than casual dining peers, Tower said in a note. 

Casual dining same-store sales performance is likely to peak in Q3 earnings while top- and bottom-line growth slows, the analyst said. 

Chipotle's Q3 same-store sales could fall short of the 5.5 percent the Street is looking for, and the stock is trading at a balanced risk-reward profile, he said. 

  • Dunkin' Brands could report in-line with a same-store sales estimate of 1.5 percent, but the stock's high valuation leaves little room for any "fundamental hiccups," Tower said. 
  • McDonald's could show continued market share gains in Q3 in a "muted" environment for quick service restaurants, he said. 
  • Restaurant Brands could show sequential same-store sale improvements from a revitalized Tim Hortons, although its other chains decelerated sequentially, according to Wells Fargo. 

Price Action

Chipotle shares were 0.3 percent higher at $433.45 at the time of publication Tuesday, while Dunkin shares were up nearly 1 percent at $73.86. McDonald's was trading up 0.1 percent at $141.33 and Restaurant Brands was 0.36 percent higher at $57.81. 

Related Links:

Piper Jaffray Upgrades BJ's Restaurants, Fiesta, Says 2018 Is 'The Year Of The Restaurant'

Guggenheim Says McDonald's Is Setting Up Well For 2019, Upgrades Stock To Buy

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


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