Welcome to Extreme Investor Network, where we provide expert insights and analysis on the latest trends in the world of investing. Today, we’re diving into the realm of restaurant chains and uncovering potential winners this earnings season, as highlighted by Jefferies.
While macroeconomic conditions are improving for restaurants, Jefferies anticipates that first-quarter results may come in largely in line with expectations. Factors such as modestly recovering same-store sales and cautious consumer spending have contributed to this outlook. However, underlying demand remains resilient as consumers continue to prioritize dining-out occasions.
In the face of uncertainties such as the new California minimum wage increase, Jefferies has identified three buy-rated restaurant stocks with the potential for modest upside. One of these names is BJ’s Restaurants, which has seen a 9% decline in shares this year. Analyst Andy Barish has a $41 price target on the stock, implying a potential rally of 25% from its current price. Jefferies believes that BJ’s earnings per share will meet expectations, with the possibility of upside in same-store sales.
Another standout recommendation from Jefferies is Bloomin’ Brands, the parent company of Outback Steakhouse and Carrabba’s Italian Grill. Despite a 4% slip in shares this year, Barish’s $34 price target suggests a potential rally of 27%. He expects earnings per share to meet or exceed estimates, with potential upside in same-store sales driven by factors such as pricing and traffic momentum.
Looking ahead to McDonald’s quarterly earnings report on April 30, Jefferies foresees first-quarter U.S. same-store sales and earnings per share estimates aligning with analysts’ expectations, with the possibility of EBITDA surprising to the upside. With shares of McDonald’s down more than 10% this year, Barish’s $330 price target indicates a potential rally of 24%. The analyst points to idiosyncratic factors that could drive market share gains for McDonald’s, including menu expansions and off-premise convenience.
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