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- Raymond James analyst Brian Vaccaro downgraded Texas Roadhouse Inc (NASDAQ: TXRH) to Market Perform from Outperform at a price target of $110.
- Although the analyst believes the company will continue to see strong market share gains, he expects an uncertain macro environment and continued beef inflation to restrict its multiple expansions initiative.
- Given given low cattle inventories resulting in lower US production (USDA expects a decline of 6% y/y in 2023) and stringent supplies, Vaccaro expects another wave of higher beef inflation (around 50% of TXRH cost of goods sold basket) to act as a headwind in coming 12-18 months.
- Also read: Food Cost Deflation Looks Likely, Says Analyst
- Vaccaro projects flattish store margins in Q1, expected mainly on the higher cost of goods sold (+60 basis points; 8.5% food cost inflation).
- He projects flattish labor expenses, assuming an 11% Y/Y higher cost per week and a mid-single-digits percentage increase in hours.
- The analyst expects EBITDA growth of 22% Y/Y to $150 million, including stock compensation of $9.6 million.
- Vaccaro is bullish on top-line growth and expects Q1 2023 revenue to increase 17.8% Y/Y to $1.16 billion, reflecting company and franchise comparable sales growth of over 10.0% Y/Y each.
- The analyst expects Q1 2023 EPS of $1.43, above the consensus of $1.34 on expected above consensus comparable sales (+12.0% as against consensus +10.6%).
- Texas Roadhouse will report Q1 2023 results on May 4.
- Price Action: TXRH shares are trading lower by 1.57% at $108.16 on the last check Monday.
| Mar 2022 | Stifel | Upgrades | Hold | Buy |
| Feb 2022 | Gordon Haskett | Upgrades | Hold | Buy |
| Feb 2022 | Deutsche Bank | Maintains | Buy |
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