New York, October 16 (FinanceEnquiry.com) – Analyst Jason West at Deutsche Bank Securities reports on Restaurants.
In a research note published on October 15, the analyst mentions that on one hand, target price of Del Frisco’s Restaurant Group LLC {(NASDAQ: DFRG) (Buy)} has been raised from $15 to $17, while on the other hand, target price of Chipotle Mexican Grill, Inc {(NYSE: CMG) (Hold)} has vastly been reduced from $375 to $320.
Furthermore, at this moment in time, it is really tough to be potent on restaurants. Many food chains confront difficult compares in fourth quarter/ first quarter and moreover this, signals on sales of September month have been feeble (subsequent choppy spring or summer). In addition to this, in opposition to approximately 3 percent in second quarter or third quarter of 2012, the consensus forecasts call for a number of same store sales (SSS) moderations in the next two quarter, to approximately 2.0 percent to 2.5 percent in fourth quarter of this year or first quarter of coming year.
On the other hand, particularly if “economic cliff” discussions weigh on consumer minds in coming months, this viewpoint may possibly not be conventional as much as necessary. Additionally, possibly leading to cautious guidance of 2013, a reacceleration of food inflation is jeopardy in 2013 (followed by labor inflation in the year 2014). Besides, so to reflect challenging trading day in the month of October and to superiorly reflect approaching difficult compares, estimates of McDonald’s Corp (NYSE: MCD) have been slashed to some extent. Also, in order to reflect good costs of avocado, Chipotle Mexican Grill (NYSE: CMG) has been tweaked higher to some extent.
Moreover, at roughly 18x 2013E P/E and approximately 9x EV/EBITDA, the industry of restaurant generally trades. In order to obtain the target prices for various restaurants, target valuation multiples (P/E, EV/EBITDA, rel. P/E, FCF yd) and DCFs are utilized. Changes in patterns of customer spending, costs of input, infection and further apprehensions of health have been comprised in the key risks, the analyst adds further.
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