Wedbush Upgrades Chuy's On Expectations Of 2020 Being A Breakout Year

Drivers seem to exist for Chuy's Holdings Inc CHUY to generate higher same-store sales growth and margins than the current 2020 expectations, according to Wedbush.

The Analyst

Wedbush’s Nick Setyan upgraded Chuy's Holdings from Neutral to Outperform raising the price target from $24.50 to $32.

The Thesis

Acceleration in off-premise growth could boost Chuy’s same-store sales growth in 2020, Setyan said in the upgrade note.

While Chuy’s off-premise growth has lagged the category since 2017, a rollout of its partnership with 3PD towards the end of the fourth quarter or early in the first quarter could narrow the gap “relatively quickly,” the analyst mentioned.

He raised the same-store sales growth estimate for next year from 1.5% to 2.0%.

Setyan expects the 3PD partnership to also be margin accretive. He also expects the closure of the four stores announced Monday to boost underlying margins by 30-50 basis points in 2020.

“Moreover, given the locations of 2020 openings, we believe opening volumes at or above the system average is realistic,” the analyst wrote.

He raised the earnings estimates for 2020 and 2021 from $1.04 to $1.14 and from $1.09 to $1.28, respectively.

Price Action

Shares of Chuy's Holdings were up 4.38% to $27.90 at the time of publishing on Friday.