Stifel's Deep Dive Into The Restaurant Sector

Earnings season is kicking off and restaurant stocks are on deck to report. Heading into the sector's prints, Stifel offered a cheat sheet for what investors should expect.

The Analyst

Stifel's Chris O'Cull.

The Thesis

O'Cull felt it prudent to survey consumer-focused investors to better understand some of the sentiment heading into restaurant earnings reports. The main takeaway: more investors are operating under the assumption that restaurant fundamentals deteriorated during the first quarter from the fourth quarter of 2017.

The findings from the survey are consistent with multiple restaurants that reported weak January and February metrics, the analyst said in a note. Industry data points to restaurant sales having improved late in the quarter, which could add fuel to the recent momentum seen in lower-valued casual dining stocks.

See Also: Stifel's Restaurant Stock Menu: What To Buy, What To Sell

Bullish, Bearish Ideas

Among the survey respondents, McDonald's Corporation (NYSE: MCD) and Restaurant Brands International Inc (NYSE: QSR) were named as top large-cap ideas ahead of the print. Domino's Pizza, Inc. (NYSE: DPZ) was crowned the top mid-cap idea and Wingstop Inc (NASDAQ: WING) ranked as the top small-cap pick.

On the other hand, Yum! Brands, Inc. (NYSE: YUM) and Chipotle Mexican Grill, Inc. (NYSE: CMG) ranked as the most negative-skewed large-cap stocks, O'Cull said. Among mid-cap picks, Shake Shack Inc (NYSE: SHAK) and Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB) were the top bearish ideas.

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