Bites of Opportunity Remain in Overcooked Sector

OVERVIEW

Restaurant stocks have room on the downside

Restaurant stock prices have doubled since their November lows, retested in March. The Zacks Restaurant Index has surged 211% from its 52-week lows, far outpacing both the Russell 2000 (up 63%) and the S&P 500 index (up 48%). The major indexes remain roughly 25% off their 52-week highs.

Valuation multiples have expanded from trough levels and the group now trades at roughly 15 times 2010 earnings. While there are pockets of opportunity in the sector, we think the recovery will be slower than anticipated by the market, weighed down by a consumer sobered by shriveling home values and retirement portfolios and record levels of debt.

Casual dining cooks up positive earnings surprises, but offers no sustenance

Driving the restaurant stock rally, was a slew of better-than-expected earnings reports Ð and upward earnings estimate revisions -- including those by Darden Restaurants (

...

Bites of Opportunity Remain in Overcooked Sector

OVERVIEW

Restaurant stocks have room on the downside

Restaurant stock prices have doubled since their November lows, retested in March. The Zacks Restaurant Index has surged 211% from its 52-week lows, far outpacing both the Russell 2000 (up 63%) and the S&P 500 index (up 48%). The major indexes remain roughly 25% off their 52-week highs.

Valuation multiples have expanded from trough levels and the group now trades at roughly 15 times 2010 earnings. While there are pockets of opportunity in the sector, we think the recovery will be slower than anticipated by the market, weighed down by a consumer sobered by shriveling home values and retirement portfolios and record levels of debt.

Casual dining cooks up positive earnings surprises, but offers no sustenance

Driving the restaurant stock rally, was a slew of better-than-expected earnings reports Ð and upward earnings estimate revisions -- including those by Darden Restaurants (

...

Bites of Opportunity Remain in Overcooked Sector OVERVIEW Restaurant stocks have room on the downside Restaurant stock prices have doubled since their November lows, which were retested in March. The Zacks Restaurant Index has surged 211% from its 52-week lows, far outpacing both the Russell 2000 (up 63%) and the S&P 500 index (up 48%). The major indexes remain roughly 25% off their 52-week highs. Valuation multiples have expanded from trough levels and the group now trades at roughly 15 times 2010 earnings. While there are pockets of opportunity in the sector, we think the recovery will be slower than anticipated by the market, weighed down by a consumer sobered by shriveling home values and retirement portfolios and record levels of debt. Casual dining cooks up positive earnings surprises, but offers no sustenance Driving the restaurant stock rally, was a slew of better-than-expected ...

Highlights include Buffalo Wild Wings (BWLD), BJ's Restaurants Inc. (BJRI), Red Robin Gourmet Burgers, Inc. (RRGB), California Pizza Kitchen, Inc. (CPKI) and Famous Dave's of America (DAVE).Sports, Alcohol Prove Recession ResistantCash-strapped consumers are cutting visits to most casual dining restaurants, but Buffalo Wild Wings (BWLD) has the formula to keep them coming back.The restaurant best known for its chicken wings and sports bar reported that same-store sales surged 6.4% in 1Q09, fueling a 31% rise in EPS before impairment charges to $0.47, in line with both consensus and Zacks' estimates.A recession and 4% menu price hikes did not stop customers from frequenting Buffalo Wild Wings. We estimate customer traffic increased by roughly 2.4% year-over-year.Revenues soared 35% in 1Q09, fueled by 25% unit growth and 10% growth in average weekly sales. While most other casual ...