ROSY SELL-SIDE SENTIMENT

Here is an interesting look at historical sell-side ratings for the restaurant industry.

This post will be short; the chart below says enough.  The sell-side is quite optimistic at the moment, rating over 50% of the stocks in our monitor “Buy”.  The number of “Sell” ratings is also at a low level.  We believe there is significant possibility for downgrades throughout the space this earnings season.  PFCB and CMG were downgraded yesterday but we expect others to follow suit over the remainder of the year.  We may be wrong though; over the past couple of years, the street has been resolutely bullish.

As the first two charts below show, the street is fairly even in its sentiment on casual dining versus quick service.  Given that quick service was more defensive during the ’08 downturn, we would advise clients of the view that a double-dip is likely to focus mainly on casual dining for shorts.  Casual dining has seen multiples come in considerably, however, and while we expect many “bargains” in the category to remain so, we feel BWLD and TXRH have room to move lower.

Within QSR, we like PNRA on the short side.  Sentiment charts on TXRH, BWLD and PNRA are also included below and show zero sells on either name from the sell-side.  

The stocks used in this analysis are AFCE, BAGL, BJRI, BOBE, BWLD, CAKE, CBOU, CBRL, CHUX, CMG, DIN, DPZ, DRI, EAT, GMCR, JACK, KKD, KONA, MCD, MRT, MSSR, PEET, PFCB, PNRA, PZZA, RRGB, RT, RUTH, SBUX, SONC, TAST, THI, TXRH, WEN & YUM.

ROSY SELL-SIDE SENTIMENT - qsr ratings

 

ROSY SELL-SIDE SENTIMENT - casual dining ratings

 

ROSY SELL-SIDE SENTIMENT - txrh ratings

 

ROSY SELL-SIDE SENTIMENT - bwld ratings

 

ROSY SELL-SIDE SENTIMENT - PNRA ratings

Howard Penney

Managing Director

Rory Green

Analyst