Food and Beverage
UBS Slices Brinker Price Target
The Associated Press
12/03/08 - 03:55 PM EST
NEW YORK -- Near-term "hurdles" at Brinker International Inc. -- including selling one of its restaurant brands and a credit review at Moody's -- led a UBS analyst to cut his price target on the company's shares Wednesday.
Analyst David Palmer said he now believes the stock will rise just about 3% to $6.50 from its closing price of $6.34 on Tuesday. Previously he thought the stock could rise to $13 in the next 12 months.
Palmer said Chili's Grill & Bar will likely be "one of the long-term surviving chains in the casual dining universe," adding the brand is "the most differentiated in the grill & bar segment."
But, he said, Brinker faces a number of issues in the short-term, including the sale of its Macaroni Grill chain, a Moody's credit review and making sure it does not violate its debt covenants. Debt covenants are rules -- such as the ratio of the company's profit to its debt -- set by lenders that a company must abide by.
"We believe that each of these 'issues' will likely fall in Brinker's favor, but together these risks create a cloud over the stock," he said.
Palmer has a "Neutral" rating on the shares.
Shares rose 6 cents to $6.40 in afternoon trading.