Canaccord Genuity Serves Up Cautious Coverage On 15 Restaurant Names

Canaccord Genuity provided a cautious forecast on the restaurant industry. Analysts Lynne Collier and Philip May are concerned with ongoing labor costs and top-line issues.

However, the brokerage believes there are select opportunities within the restaurant industry where multiples have contracted. The lead analyst listed four key factors for preferring the shares within the industry.

The first is a favorable forecast on SSS and the possibility of gaining market share. The second factor is the focus on attracting millennials, emphasizing fresh food offerings, technology advancements and high-quality service. The third factor is relative valuations with reasonable history, and the fourth one related to return of cash to shareholders through share buyback program and dividends, possible with strong free cash flow.

Related Link: Most People Have Never Heard Of The Fastest Growing Restaurant

Canaccord said in its research note that, "Over all, we think the consumer is relatively strong given an improving consumer confidence and employment, robust new home sales and rising wage rates. That said, restaurant industry SSS have sequentially decelerated in Q2 vs. Q1 for all restaurant categories. As we look into the balance of '16, we estimate that SSS for casual dining will be flattish to slightly negative."

The brokerage's rating and price targets on fifteen stocks are given below:

• BJ's Restaurants, Inc. (NASDAQ: BJRI): Hold, $43 price target.
• Buffalo Wild Wings (NASDAQ: BWLD): Hold, $175 price target.
• Cheesecake Factor Inc (NASDAQ: CAKE): Hold, $54 price target.
• Chipotle Mexican Grill, Inc. (NYSE: CMG): Hold, $425 price target.
• Del Frisco's Restaurant Group Inc (NASDAQ: DFRG): Hold, $15 price target.
• Darden Restaurants, Inc. (NYSE: DRI): Hold, $74 price target.
• Brinker International, Inc. (NYSE: EAT): Hold, $56 price target.
• Fogo De Chao Inc (NASDAQ: FOGO): Hold, $13 price target.
• Fiest Restaurant Group Inc (NASDAQ: FRGI): Hold, $25 price target.
• McDonald's Corporation (NYSE: MCD): Hold, $122 price target.
• Dave & Buster's Entertainment, Inc. (NASDAQ: PLAY): Buy, $52 price target.
• Panera Bread Co (NASDAQ: PNRA): Buy, $255 price target.
• Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB): Hold, $53 price target.
• Sonic Corporation (NASDAQ: SONC): Buy, $35 price target.
• Texas Roadhouse Inc (NASDAQ: TXRH): Hold, $48 price target.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!