ICR, a leading strategic communications firm, today announced the top picks for its 2015 Best Restaurant Stock Pick Competition and recognized Nick Setyan of Wedbush Securities as the winner of its 2014 Best Restaurant Stock Pick Competition. The 2015 selections were made by leading sell-side equity research analysts ahead of the 17th Annual ICR XChange, which will be held January 12-14, 2015 at the JW Marriott Orlando Grande Lakes in Orlando, Florida.
“The ICR Best Restaurant Stock Pick Competition is now in its sixth year and is an event that restaurant industry attendees and ICR XChange sponsors look forward to every January,” said Tom Ryan, Chief Executive Officer, ICR. “We are pleased to congratulate first-time winner Nick Setyan of Wedbush Securities for his 2014 selection of Jack in the Box Inc. (NASDAQ: JACK), which rose 60 percent and handily beat the S&P 500, which gained 11 percent over the same period.”
The participating analysts’ predictions for the 2015 Best Restaurant Stock Pick Competition include:
Bloomin’ Brands, Inc. (NASDAQ: BLMN) – Andrew Strelzik, BMO Capital Markets, “We believe BLMN is a compelling multi-year investment opportunity as strategic initiatives and underlying fundamentals should allow BLMN to achieve – and likely exceed – its EPS targets, while more consistent operating performance and returning cash to shareholders create incremental valuation opportunities. BLMN likely can generate 20 percent EPS growth in both 2015 and 2016 as Outback comp momentum, an inflection in Bonefish and Carrabba’s comps, cost savings and the absence of the 2014 Korea headwind in 2015 bridge to the significant earnings opportunity from lower beef prices in 2016.”
Chuy’s Holdings, Inc. (NASDAQ: CHUY) – Will Slabaugh, Stephens Inc., “A steady improvement in new unit volumes and a calculated plan to improve new unit profitability to capture recently lost margin should outperform what we see as very low investor expectations.”
Dunkin’ Brands Group, Inc. (NASDAQ: DNKN) – Sharon Zackfia, William Blair & Company, “Given the recent stock pullback on a lowered 2015 outlook, we see the potential for Dunkin’s shares to rebound nicely in 2015. We believe new guidance will prove achievable if not beatable with Dunkin’ U.S. comps likely to improve in 2015 as the company laps easier comparisons related to both weather and a heavily promotional QSR breakfast environment. Moreover, we believe management has prudently handicapped expectations for international profitability next year and view the longer-term prospects for Dunkin’ as solid given still positive traffic trends, franchisee profitability at all-time highs and a robust development pipeline.”
Krispy Kreme Doughnuts, Inc. (NYSE: KKD) – Nick Setyan, Wedbush Securities, “We believe that a near-term inflection in KKD’s SSS growth trajectory, combined with acceleration in both company and franchised unit development to a mid-teens growth rate could result in upside to FQ4:15 and FY16 expectations, as well as an upward revaluation of shares. Mature sales run rates at the new smaller prototypes continue to trend at ~$30K/week, a level we believe results in cash-on-cash returns of >70 percent and justifies continued acceleration in company-owned development. With >40 percent cash-oncash returns for franchisees, we believe FY15 domestic franchise unit growth guidance of 20-25 units is realistic, and that franchisee development is poised for annual mid-teens unit growth going forward. In addition, 43M remains on existing repurchase authorizations, and we expect ~$17 million to be deployed in FQ4. We reiterate OUTPERFORM and our $24 price target.”
Noodles & Company (NASDAQ: NDLS) – David Tarantino, Robert Baird & Co., “Our top pick is NDLS. We believe Noodles is a highly differentiated and compelling concept that is well positioned to capture share within the rapidly growing fast-casual segment of the industry. After a relatively sluggish year in 2014, we see potential for same-store sales and earnings momentum to bounce back in 2015. Additionally, given that the company remains in the early stages of expansion, we think NDLS can sustain above-average growth well beyond 2015. We believe a premium valuation for NDLS is supported by the company’s sizable unit growth opportunity, good incremental returns on capital and prospects for solid near-term operating results.”
Papa John’s International Inc. (NASDAQ: PZZA) – Peter Saleh, Telsey Advisory Group, “We believe 2015 will be characterized by operating margin expansion driven by moderating cheese costs and continued market share gains, both domestically and internationally. We continue to believe that double digit unit growth internationally, coupled with mid-single digit same-store sales increases will lead to earnings outperformance. Domestically, we believe the implementation of the new POS system, growth in digital orders (now at 50 percent of sales), and a decline in fuel prices could help drive margin expansion in the new year. Furthermore, we expect free cash flow to increase in 2015 as CAPEX declines, leading to more significant share buybacks and continued dividend increases.”
Papa Murphy’s Holdings, Inc (NASDAQ: FRSH) – Andy Barish, Jefferies, “Papa Murphy’s Holding, Inc. will continue to drive growth in the pizza category through new unit openings, same-store sales and share gains. The continued implementation of marketing, POS, online ordering and improved operations should lead to strong results and drive the stock higher. The valuation remains attractive as it trades at a discount to its highly franchised peers.”
Panera Bread Company (NASDAQ: PNRA) – Jeffrey Bernstein, Barclays, “We expect Panera 2.0 will support a re-acceleration in EPS growth medium-term. With short-term expectations low, we see a favorable risk-reward, especially as traffic has already begun to turn ahead of the Panera 2.0 rollout. While many are cautious on a 12+ month turnaround, we expect the shares will outperform, driven by EPS upside and related multiple expansion. Our price target is $183.”
Panera Bread Company (NASDAQ: PNRA) – Jeff Farmer, Wells Fargo Securities, “Our top pick for 2015 is Panera Bread Company. Although we expect 2015 EBITDA growth to be modest (flattish), we believe Panera’s valuation will inflect with improving topline trends. Our confidence in Panera’s ability to accelerate both transaction and SSS growth in 2015 is driven by the combination of: (1) staffing and increased throughput efforts that began to roll out in late 2013 but are just now beginning to pick up momentum (30 second improvement off of almost 4 minute production time entering Q3 2014); (2) the introduction of new creative/advertising in early 2015 following frustrating early marketing efforts in 2014; (3) rapid pick-up taken nationwide with the full benefit of marketing support by spring 2015; and (4) a tiered menu pricing strategy that will look to reduce price sensitivity on a market-to-market basis.”
Restaurant Brands International (NYSE: QSR) – Nicole Miller Regan, Piper Jaffray, “We recognize QSR (formerly BKW) shares as a top pick as we enter the new year. Following the company’s recent merger with Tim Hortons (THI), we believe the newly combined entity is positioned to evolve into a portfolio of global growth brands over time. Further, we believe the company will exhibit a strong cash flow generation profile that will support both continued reinvestment into the business and an eventual return to capital allocation via share repurchase and dividends over time. Primary catalysts include continued business momentum, accelerated development, and capital deployment. We reiterate our OW rating and are increasing our PT to $44 (vs. $34 prior) based on 20x our FY15 EV/EBITDA (vs. 16x prior). We believe the increased multiple is warranted given the growth in scale and EBITDA following the recent merger.”
The best stock picks of 2014 as selected by leading sell-side equity research analysts ahead of the 16th Annual ICR XChange in January 2014 were Bloomin’ Brands, Inc. (NASDAQ: BLMN); Carrols Restaurant Group, Inc. (NASDAQ: TAST); Chuy’s Holdings, Inc. (NASDAQ: CHUY); Del Frisco’s Restaurant Group, Inc. (NASDAQ: DFRG); Ignite Restaurant Group, Inc. (NASDAQ: IRG); Jack in the Box Inc. (NASDAQ: JACK); Papa John’s International Inc. (NASDAQ: PZZA); and Starbucks Corporation (NASDAQ: SBUX).