Texas Roadhouse Faces Beef Inflation Headwinds, Analyst Downgrades Stock

Raymond James analyst Brian Vaccaro downgraded Texas Roadhouse Inc TXRH to Market Perform from Outperform at a price target of $110.
Although the analyst believes the company will continue to see strong market share gains, he expects an uncertain macro environment and continued beef inflation to restrict its multiple expansions initiative.
Given given low cattle inventories resulting in lower US production (USDA expects a decline of 6% y/y in 2023) and stringent supplies, Vaccaro expects another wave of higher beef inflation (around 50% of TXRH cost of goods sold basket) to act as a headwind in coming 12-18 months.
Also read: Food Cost Deflation Looks Likely, Says Analyst
Vaccaro projects flattish store margins in Q1, expected mainly on the higher cost of goods sold (+60 basis points; 8.5% food cost inflation).
He projects flattish labor expenses, assuming an 11% Y/Y higher cost per week and a mid-single-digits percentage increase in hours.
The analyst expects EBITDA growth of 22% Y/Y to $150 million, including stock compensation of $9.6 million.
Vaccaro is bullish on top-line growth and expects Q1 2023 revenue to increase 17.8% Y/Y to $1.16 billion, reflecting company and franchise comparable sales growth of over 10.0% Y/Y each.
The analyst expects Q1 2023 EPS of $1.43, above the consensus of $1.34 on expected above consensus comparable sales (+12.0% as against consensus +10.6%).
Texas Roadhouse will report Q1 2023 results on May 4.
Price Action: TXRH shares are trading lower by 1.57% at $108.16 on the last check Monday.

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