Raymond James Sees Mixed Q4 Earnings Signals For US Restaurant Stocks - Dave (NASDAQ:DAVE), Bloomin Brands (NASDAQ:BLMN), Cheesecake Factory (NASDAQ:CAKE), Dine Brands Global (NYSE:DIN)

Raymond James analyst Brian M. Vaccaro thinks most restaurant stocks have strongly outperformed YTD due to a combination of the broader risk-on trade gaining traction and improved industry demand trends in January following softer trends in December.
As has been the case for a few quarters now, the analyst continues to lean less negatively on the U.S. consumer backdrop and will remain focused on two primary drivers of demand growth through ’23.
The drivers are aggregate job and wage growth and the burn rate of excess savings, which the analyst believes remains a buffer to spending among middle/upper income consumers.
The analyst has downgraded Cheesecake Factory Inc CAKE and Dine Brands Global Inc DIN to Market Perform.
On CAKE, the analyst’s 2023 EPS estimates remain below consensus, reflecting continued concerns regarding the company’s ability to recover pre-COVID margins.
On DIN, the stock now trades in-line with its historical valuation range, and the analyst is mindful of two risks that could limit further upside.
The risks include Applebee’s could cede some of its pandemic share gains as some national competitors increase advertising spend, and the company needs to refinance $700 million of securitized notes, negatively impacting EPS.
The analyst reiterated a Strong Buy rating on Dave & Buster’s Entertainment Inc PLAY and Bloomin’ Brands Inc BLMN, which also remains as the analyst’s top two stock ideas.
Both trade at depressed valuations and have idiosyncratic drivers in 2023, the analyst reasoned.
The analyst reiterated an Outperform rating on the shares of Brinker International Inc EAT and expects strong Q2 results reflecting solid traction in the early stages of management’s turnaround plan.
The analyst reiterated a Market Perform rating on the shares of Shake Shack Inc SHAK.
While commodity inflation has been hotter for longer, in part due to a few unexpected (temporary) spikes in certain categories, the analyst expects y/y COGS inflation to moderate for most companies through 2023.
Price Action: PLAY shares traded lower by 1.71% at $41.40 on the last check Tuesday.
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