Top Restaurant Stock Picks Announced Ahead of the ICR Conference
Will Slabaugh of Stephens Inc. Recognized for Top Pick of 2015
Predictions for 2016 Announced
New York, NY – January 8, 2016 – ICR, a leading strategic communications and advisory firm, today announced the top picks for its 2016 Best Restaurant Stock Pick Competition and recognized Will Slabaugh of Stephens Inc. as the winner of the 2015 competition. The 2016 selections were made by leading sell-side equity research analysts ahead of the ICR Conference, which will take place January 11-13, 2016 at the JW Marriott Orlando Grande Lakes in Orlando, Florida.
“The Best Restaurant Stock Pick Competition is an annual ICR Conference tradition, one that is highly anticipated by restaurant industry attendees and conference sponsors alike,” said Tom Ryan, Chief Executive Officer, ICR. “We congratulate Will Slabaugh of Stephens Inc. for the best pick of 2015 with his selection of Chuy’s Holdings, Inc. (NASDAQ: CHUY). The stock rose almost 60 percent which trounced the S&P 500, which decreased one percent over the same period.”
The participating analysts’ predictions for the 2016 Best Restaurant Stock Pick Competition include:
- BJ’s Restaurants Inc. (NASDAQ: BJRI) – Matt DiFrisco, Guggenheim Securities, LLC, “We continue to like BJRI as our Best Idea in 2016. We expect the casual diner to regain SSS momentum and model 2% SSS in 2016. With superior unit growth of +10% and the possibility of 20% restaurant margins we view a premium multiple as justified for a $2 dollar earner in 2016.”
- Buffalo Wild Wings (NASDAQ: BWLD) – Andrew Strelzik, BMO Capital Markets, “The pullback in BWLD’s stock presents a compelling entry point for investors to capitalize on an overreaction to temporary top-line issues ahead of a period of outsized earnings growth. Against the backdrop of tepid casual dining same store sales trends, BWLD is positioned to reaccelerate its same store sales trajectory, while headwinds from food costs and labor in 2015 likely will become tailwinds in 2016.”
- Buffalo Wild Wings (NASDAQ: BWLD) – Will Slabaugh, Stephens Inc., “We believe positive and improving traffic trends, combined with softening input costs and a likely more accretive franchise acquisition than most realize could drive meaningful upside to FY16 estimates. We also expect this to result in improved sentiment and valuation after a 3Q that disappointed investors on what had become overly bullish expectations. Given the estimate and valuation reset, we believe the entry point is very attractive at these levels.”
- Buffalo Wild Wings (NASDAQ: BWLD) – Keith Siegner, UBS, “We believe there are enough sales drivers in place to support top/bottom line growth, combined with lower wing costs & contribution from franchise acquisitions, to make 25%+ EPS growth achievable.”
- Chipotle (NYSE: CMG) – Sharon Zackfia, William Blair & Company, LLC, “Chipotle’s shares have been pummeled as recent E. coli illnesses have damaged the company’s consumer perception and resulted in steep same-store sales declines. While a lack of clarity exists on the cost of new food safety procedures, we expect rebounding same-store sales trends to bolster the stock, and anticipate comps will bottom in December 2015 and then improve throughout 2016 as Chipotle shifts to an offensive stance in communicating its new food safety protocol and aggressively marketing to woo back consumers. Longer-term, we continue to expect Chipotle to emerge largely unscathed, as sales softness related to foodborne illnesses tends to be relatively short in duration.”
- El Pollo Loco (NASDAQ: LOCO) – Andy Barish, Jefferies, “El Pollo Loco is our top pick in 2016 as we believe the company will return to positive same-store sales with more balance of value and premium products and new unit growth will continue to ramp to high single-digits. We like the California positioning as we believe the state will continue to see a good sales environment as minimum wage increases drive demand. LOCO will have lower chicken costs to help offset wage-related margin pressure and drive double-digit EPS gains. The stock has an attractive valuation at around 17x 2016 P/E and 9x EV/EBITDA.”
- Fiesta Restaurant Group Inc. (NASDAQ: FRGI) – Brian Vaccaro, Raymond James, “We believe FRGI is poised to strongly outperform in 2016 following a difficult year in 2015 that resulted in a material revaluation in the stock (down nearly 50%). We expect traffic trends at its core long-term growth vehicle, Pollo Tropical, to improve behind management’s menu (disruptive value promotion launched in November ‘15, increased innovation) and marketing (increasing spend ~40% including significant increase in core South FL markets) initiatives. We also expect sales volumes in new markets (Texas, Atlanta, GA) to increase in late ’16 and into ’17 as the company reaches media efficiency and begins to build stronger brand awareness. This should, in turn, help to restore investor confidence in the company’s open-ended long-term growth opportunity and, combined with improving near-term trends, result in meaningful multiple expansion from current depressed levels.”
- Jack in the Box (NASDAQ: JACK) – Alex Slagle, Jefferies, “Although sentiment in the group remains negative, we’d take advantage of the fear and buy Jack in the Box (JACK) as we see SSS & EPS growth continuing to surpass many QSR peers in 2016 and a valuation that has room to expand from 10.5x EV/ C16 EBITDA toward peers at 12.5x or higher. We like JACK’s California exposure, accelerating ROIC trends, and opportunity to see improving traffic trends at both brands in ’16 (vs 2H15 levels) as new food news and effective media efforts move the needle. Longer term, we see a significant value creation opportunity in Qdoba.”
- Panera Bread Company (NASDAQ: PNRA) – Jeff Bernstein, Barclays, “Panera Bread remains our top pick as a more discretionary restaurant concept well positioned in an improving US economy. Beyond macro drivers, we believe Panera offers the best of both short-term strategic / value-enhancing initiatives and long-term fundamental turnaround initiatives. The former involves leverage, share repurchase, refranchising, and G&A savings. The latter is driven by Panera 2.0, which is an overhaul of the consumer-facing model, driven by both digital and operational enhancements.”
- Panera Bread Company (NASDAQ: PNRA) – Andrew Charles, Cowen and Company, “Panera is our top pick for 2016. We are encouraged by plans to vastly complete 2.0 conversions in 2016 as it signifies optimism around the initiative and we believe justifies multiple expansion as intended results should be recognized sooner rather than later. Investors are concerned 2016 EPS guidance will be soft due to the rapid pace of conversions leading to a heightened amount of transition and startup costs. We believe guidance might be conservative by design as PNRA completes the final tranche of a planned $500M share repurchase program in 1Q at more favorable prices, and in our view, 2016 sets up as a beat & raise year as 2.0 drives upside to sales.”
- Zoe’s Kitchen, Inc. (NYSE: ZOES) – Paul Westra, Stifel, “We view Zoe’s Kitchen (ZOES) as our top multi-year stock-pick given its powerful strategic positioning and its historic early returns-on-capital. Zoes Kitchen is the poster-child for what we look for in a well-positioned quick-casual concept: (1) the right output (high sales mixes of dinner, dine-in and female/families); (2) the right cuisine (Mediterranean taps into America’s growing Lifestyles of Health and Sustainability (LOHAS) movement); and (3) the right operations-based culture. Financially, ZOES also makes more money at ~160 units than any concept we are aware of in US history (including CMG, SBUX and PNRA) which we believe are poised to accelerate in 2016 as the concept begins to achieve ‘critical mass’ through further market-level unit penetration in several key markets (including Dallas and Houston).”
The best stock picks of 2015 as selected by leading sell-side equity research analysts ahead of The ICR Conference in January 2015 were Bloomin’ Brands, Inc. (NASDAQ: BLMN); Chuy’s Holdings, Inc. (NASDAQ: CHUY); Dunkin’ Brands Group, Inc. (NASDAQ: DNKN); Krispy Kreme Doughnuts, Inc. (NYSE: KKD); Noodles & Company (NASDAQ: NDLS); Papa John’s International Inc. (NASDAQ: PZZA); Papa Murphy’s Holdings, Inc. (NASDAQ: FRSH); Panera Bread Company (NASDAQ: PNRA), Panera Bread Company (NASDAQ: PNRA); and Restaurant Brands International (NYSE: QSR).
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About The ICR Conference
The ICR Conference is a unique platform where public and private company management teams, institutional investors, sell-side research analysts, investment bankers, private equity professionals and select media connect with one another with the goal of understanding consumer trends and public company prospects as the year begins. The event is one of the largest investment conferences of the year, featuring presentations by more than 150 public and private companies, with attendance regularly exceeding 2,000. For more information please visit www.icrconference.com
Established in 1998, ICR partners with companies to optimize transactions and execute strategic communications programs that achieve business goals, build credibility and enhance long-term enterprise value. The firm’s highly differentiated service model, which pairs capital markets veterans with senior communications professionals, brings deep sector knowledge and relationships to more than 500 clients in approximately 20 industries. Today, ICR is one of the largest and most experienced independent communications and advisory firms in North America maintaining offices in New York, Norwalk, Los Angeles, Boston, San Francisco and Beijing.
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Julia Young/Christine Beggan