Q4 Restaurant Review: Wedbush Favors Jack In The Box, Starbucks

Restaurant companies are set to report their fourth-quarter financial results in challenging industry conditions dominated by tough competition and continued weakness in Texas, which in turn are weighing on same-store sales.

Favorites

Wedbush said it continues to favor Jack in the Box Inc. JACK most due to the confidence in management’s ability to meet or exceed EPS expectations in a muted sales environment. Analyst Nick Setyan sees refranchising, G&A opportunities and share repurchases as drivers of EPS in-line to above guidance.

Setyan also favors Starbucks Corporation SBUX and Del Taco Restaurants Inc TACO given their defensive nature with de-risked near-term top lines and medium-term comp and margin drivers.

Out Of Favor

On the flip side, the analyst is incrementally cautious on Panera Bread Co PNRA, citing unfavorable risk/reward and heightened expectations of strong go-forward comps.

“Based on our checks, we no longer believe go forward expectations are as safe,” Setyan wrote in a note.

In addition, Setyan expects a disappointing print and weak 2017 outlook from both BJ's Restaurants, Inc. BJRI and Buffalo Wild Wings BWLD. Further, he sees Shake Shack Inc SHAK’s comps and AUVs to be pressured ahead of current expectations, leading to disappointing EBITDA growth.

For Chipotle Mexican Grill, Inc. CMG, the analyst predicts below consensus results, with margins likely to remain under pressure in 2017. That said, Wedbush believes Chipotle’s focus on margins at current sales run rates is poised to benefit 2018.

Sidelined

Meanwhile, Setyan remains on sidelines on Wendys Co WEN, saying increased visibility into fundamental drivers of EBITDA growth reacceleration in 2017 and beyond is necessary for further multiple expansion.

Ratings And Price Targets

Following are the ratings and price target of various restaurant stocks covered by Wedbush:

Company	Rating	Price Target
BJ's Restaurants	Underperform	$31.50
Buffalo Wild Wings	Neutral	$155.00
Chuy's Holdings Inc CHUY	Outperform	$31.00
Chipotle Mexican Grill	Neutral	$400.00
Del Taco	Outperform	$17.00
Denny's Corporation DENN	Outperform	$14.00
Dunkin Brands Group Inc DNKN	Neutral	$49.00
Fiesta Restaurant Group Inc FRGI	Outperform	$32
Habit Restaurants Inc HABT	Outperform	$20.00
Kona Grill Inc KONA	Outperform	$12.00
Noodles & Co NDLS	Neutral	$4.50
Popeyes Louisiana Kitchen Inc PLKI	Outperform	$72.00
Panera Bread	Neutral	$220.00
Shake Shack	Underperform	$30.00
Wendy's	Neutral	$14.00
Wingstop Inc WING	Outperform	$36.00