Wall Street analysts were asked to predict the best-performing restaurant stocks for 2014 to kick of the 16th annual ICR XChange, a restaurant and retail investment conference taking place Jan. 13-15 at the Grande Lakes Hotel & Resort in Orlando, Fla.
The top-performing stock for 2013, picked by Raymond James at the beginning of last year, was Red Robin Gourmet Burgers Inc., which saw its stock price rise by 108 percent during the year.
Here are the analysts’ predictions for 2014:
Bloomin’ Brands Inc. (NQ: BLMN): picked by Jeffrey Bernstein, director and senior research analyst for Barclays, and Andy Barish, managing director and senior equity research analyst for Jefferies.
“Bloomin’ has the internal same-store sales drivers and margin improvement/productivity initiatives to offset a tough casual-dining environment and outperform its peers,” Barish said.
Carrols Restaurant Group Inc. (NQ: TAST): picked by Bryan Elliott, managing director of equity research for Raymond James, and Brian Vaccaro, senior research associate of Raymond James.
“We view Carrols as an overlooked special situation stock that is effectively a levered bet,” Elliott wrote, pointing to the Burger King franchisee’s ability to improve margins at the 275 units acquired in 2012, the ability to add more units, and share gains driven by new menu items, strong marketing and the systemwide remodeling program.
Chuy’s Holdings Inc. (NQ: CHUY): picked by David Tarantino, associate director of research and senior research analyst for Robert W. Baird.
“We believe CHUY is a compelling early-stage growth story, with opportunity to drive well above-average revenue and earnings growth in 2014 and beyond,” Tarantino wrote. “We think a premium valuation for CHUY is supported by the company’s visible unit growth opportunity, strong unit-level returns on capital, and prospects for solid near-term operating momentum.”
Del Frisco’s Restaurant Group Inc. (NQ: DFRG): picked by Will Slabaugh, vice president and research analyst for Stephens Inc.; and Paul Westra, managing director of Stifel.
“We see DFRG as an under-the-radar unit growth story that should receive a more appropriate valuation as new units continue to outperform and the company’s exposure to a higher-end consumer produces steady results,” wrote Slabaugh.
Ignite Restaurant Group Inc. (NQ: IRG): picked by Nicole Miller Regan, managing director and senior research analyst for Piper Jaffray.
While noting some risk based on the company’s ability to sustain negative cash flows, Regan predicted the core business will grow and help stabilize the recently acquired Macaroni Grill, “with the company ultimately transitioning to a casual-dining growth portfolio as both an owner/operator and franchisor.”
Jack in the Box Inc. (NQ: JACK): picked by Nick Setyan, vice president of equity research for Wedbush Securities.
Qdoba is poised to prove it is a legitimate growth company in 2014, he said, and JIB is already the second most profitable company-owned base in QSR burgers. “We believe there are still two years of relatively low-hanging fruit remaining to further increase profitability.”
Papa John’s International Inc. (NQ: PZZA): picked by Peter Saleh, director and senior restaurant analyst of Telsey Advisory Group.
Telsey argued the pizza chain will continue to take market share with its digital platform. “We continue to believe that double-digit unit growth internationally (95 percent franchise-funded), coupled with mid-single-digit same-store sales increases will lead to earnings outperformance,” he said.
Starbucks Corp. (NQ: SBUX): picked by both Gregory Badishkanian, managing director and senior restaurant and leisure analyst for Citi Research; and Mark Kalinowski, restaurant analyst for Janney Capital Markets.
“We believe the U.S. segment should continue benefiting from a resilient high-end consumer, while international continues to progress on its turnaround, and channel development and recent acquisitions provide growth potential,” wrote Badishkanian.