KeyBanc Initiates Coverage on Restaurant Stocks

KeyBanc Capital Markets initiated coverage on a number of restaurant stocks on Friday. KeyBanc analysts started Cracker Barrel at "Buy" with a $75.00 price target. They wrote, “We believe estimates and valuation underestimate CBRL's ability to drive upside to its 12-15% EPS growth target during the next few years. Visible top-line drivers, tight cost controls and significant capital deployment opportunities should lead to results ahead of the Street's $4.64 EPS estimate for FY13. Moreover, nervous sentiment toward the activist shareholder, Biglari Holdings, creates a buying opportunity.” During Friday's trading session, CBRL shares have added 0.90% to $63.08. The firm initiated Darden Restaurants DRI at "Hold" rating. Darden recently purchased the Yard House for $585 million in cash. The analysts wrote, “Same-restaurant sales (SRS) improving at Olive Garden is unlikely before 2H13, or when several new menu and advertising changes are implemented. Moreover, we believe near-term EPS estimates may be too aggressive. However, the stock price downside risk is limited, in our opinion, as easing commodity prices and unit growth should contribute meaningfully to EPS growth in FY13, and investors can receive a 4% annual dividend yield.” DRI shares have fallen 0.26% on Friday. KeyBanc is positive on shares of Brinker International EAT. They initiated the stock at "Buy" with a $40 price target. The analysts wrote, “Chili's is well-positioned to grow EPS in the 17-20% range for the next few years fueled by at least 3% SRS gains, 1-2% unit growth, 150 bps of margin expansion during the next two years, and 5-7% of annual share count reduction. The Street's 15% EPS growth projection for the next few years will likely prove conservative as SRS gains, coupled with cost improvements, deliver better than expected profit growth, which in turn provides greater capacity for share repurchases.” During Friday's trading session, EAT shares have climbed 1.13% to $32.13.