This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Restaurant Stocks: Earnings to Watch

(Restaurant stocks earnings article updated with Darden Restaurants results.)

NEW YORK ( TheStreet) -- Expectations were high for the $184 billion restaurant sector this earnings season.

With the inherent limits to the number of new stores any one brand can open, still-uncertain economic times and trends pointing toward rising commodities all converging, valuations in the restaurant space were relatively swollen, noted Deutsche Bank analyst Jason West.

>> Bankruptcy Watch: 20 Riskiest Restaurant Stocks

The industry as a whole is expected to grow 2.5% annually through 2015. Key drivers of the sector, according to IBISWorld analyst Nima Samadi, include consumer spending, elevated health consciousness, competition from full-service restaurants, per capita disposable income and overall consumer sentiment.

West was more optimistic in the short term, citing the combination of "still-recovering sales and still-benign costs (both food and labor)" making for "a positive backdrop to [third quarter of 2010] results." The analyst also noted that weak economic data stokes the likelihood of more federal aid in the way of stimulus, which tends to be good for discretionary stocks like those in the restaurant sector.

>>5 Restaurant Stocks to Buy Now

Stifel Nicolaus analyst Steve West said that "easy comps and extensive cost savings should offset strained sales from depressed consumer spending, boosting restaurant [third-quarter 2010 earnings-per-share] growth of 6% (though still less than 10% on average)."

He expected average comps growth of 18% in the casual dining space to outpace a 2% comps uptick in the quick-service space -- the first time in years that casual restaurants would outpace.

Same-store sales, also known as comps, which measure sales at stores open at least one year -- a closely watched metric in the restaurant industry -- were expected to grow modestly in the third quarter, Deutsche Bank's West said, with the group averaging 1.2% growth in the period. Despite the expected uptick, the analyst expected demand would "just hold steady in coming months, rather than show robust acceleration," and that comparisons would be more difficult in the fourth quarter for most stocks in the sector.
1 of 22

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
BWLD $192.99 -1.30%
CMG $741.57 -0.09%
EAT $59.16 -1.20%
MCD $99.38 -0.48%
PNRA $202.81 -0.64%

Markets

Chart of I:DJI
DOW 17,565.82 -124.04 -0.70%
S&P 500 2,091.03 -12.81 -0.61%
NASDAQ 5,099.1270 -29.1540 -0.57%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs