ICR Announces Analysts’ Top Restaurant Stock Picks for 2014 Ahead of the 16th Annual ICR XChange

Bryan Elliott and Brian Vaccaro of Raymond James Recognized for Making Best Restaurant Stock Pick of 2013

ICR, a leading strategic communications firm, today announced the top picks for its 2014 Best Restaurant Stock Pick Competition. Stock picks were made by a slate of leading sell-side equity research analysts ahead of the 16th Annual ICR XChange, which will be held January 13-15, 2014 in Orlando, Florida.

Bryan Elliott, Managing Director of Equity Research, and Brian Vaccaro, Senior Research Associate, Raymond James were the winners of 2013’s stock pick competition for their choice of Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB), which rose 108 percent in 2013. Raymond James has now won ICR’s Best Restaurant Stock Pick Competition three times in the last five years.

“This is the fifth year we’ve run our restaurant stock picking competition, and it’s become one of the highlights of the XChange. Last year’s participants made great selections. An investor who purchased the entire recommended list would have generated a 52 percent annual return, which compares favorably to the S&P 500 gain of 30 percent,” said Tom Ryan, Chief Executive Officer, ICR. “Congratulations to Bryan Elliott and Brian Vaccaro for making the best pick of 2013 and for their exceptional track record in winning our annual contest. We’ll be closely watching how the 2014 entrants into the ICR Best Restaurant Stock Pick Competition fare over the course of the year.”

The participating analysts’ predictions for the best performing restaurant stock of 2014 include:

  • Bloomin’ Brands, Inc. (NASDAQ: BLMN) – Jeffrey Bernstein, Director and Senior Research Analyst, Barclays: “We believe Bloomin’ Brands should be viewed as a unique and compelling casual dining portfolio, with strong brands across multiple categories. The portfolio combines the maturity and industry leadership of Outback US along with the growth of Bonefish, Outback International and Carrabba’s. Looking to 2014, we expect comp outperformance to prevail, and cost savings to be large, supporting high-teens EPS growth. While casual dining remains challenged, we believe the relative strengths of the Bloomin’ portfolio make a compelling long-term investment.”
  • Bloomin’ Brands, Inc.(NASDAQ: BLMN) – Andy Barish, Managing Director and Senior Equity Research Analyst, 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.”
  • Carrols Restaurant Group (NASDAQ: TAST) – Bryan Elliott, Managing Director of Equity Research and Brian Vaccaro, Senior Research Associate, Raymond James: “We view Carrols as an overlooked special situation stock that is effectively a levered bet on 1) Carrols management team’s proven ability to drive sustained margin improvement at the 275 units acquired from Burger King Worldwide in May ’12, 2) Carrols opportunity to add more underperforming units in the US Burger King system, and 3) continued share gains for the Burger King brand driven by new menu items, the brand’s strong marketing position, and the benefits of the system-wide remodeling program. In ’14 we expect stock price gains to be driven by continued margin improvement at the acquired units, which in turn should increase visibility for consolidated EBITDA approaching $50-55 million over the next 18-24 months. In addition by 2H:14 investors should also begin to discount a refinancing of the company’s 11.25 percent notes which should generate meaningful interest savings. After the current remodeling initiative (~40 percent complete) is done (late ’15, early ’16), free cash flow can approach $40 million. This level of free cash flow could support a stock price in the low double digits.”
  • Chuy’s Holdings, Inc. (NASDAQ: CHUY) – David Tarantino, Associate Director of Research, Senior Research Analyst, Robert W. Baird: “Our top pick is CHUY. 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. 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. (NASDAQ: DFRG) – Will Slabaugh, Vice President and Research Analyst, Stephens Inc: “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. We also see the Sullivan’s concept as a free call option at these levels and believe a quicker-than-expected turnaround is very possible for the brand. Our $30 target offers nearly 50 percent upside.”
  • Del Frisco’s Restaurant Group, Inc. (NASDAQ: DFRG) – Paul L. Westra, Managing Director, Stifel: “We see DFRG as the industry’s cheapest growth stock, delivering double-digit capacity growth at the highest returns-on-capital within the full-service restaurant sector – all being executed by one of the best operating teams in the industry. We see Del Frisco’s Grille to be the most exciting concept within the upscale polished-casual dining space with over 100 potential future sites and our one-year price target is $32 per share.”
  • Ignite Restaurant Group, Inc. (NASDAQ: IRG) – Nicole Miller Regan, Managing Director and Senior Research Analyst, Piper Jaffray: “The longer-term opportunity on a consolidated basis remains attractive (with a noted high degree of risk based on the company’s ability to sustain negative cash flows) as the core business grows and funds investments into turning Macaroni Grill, which ultimately stabilizes itself and capital is then used for accelerated development, once again—with the company ultimately transitioning to a casual-dining growth portfolio as both an owner/operator and franchisor. Going forward, we look for continued updates around the Macaroni Grill brand over the course of the year and through
    the brand’s ongoing integration more consistent sales and profitability trends through FY14. We reiterate our Overweight rating and $17 price target.”
  • Jack in the Box Inc. (NASDAQ: JACK) – Nick Setyan, Vice President, Equity Research, Wedbush Securities: “We believe Qdoba is poised to prove it is a legitimate growth company in 2014, which we believe will drive an upward revaluation of this segment. The JIB segment is already the second most profitable company-owned base in the QSR burger category, and we believe there are still 2 years of relatively low-hanging fruit remaining to further increase profitability. We also maintain that guidance and expectations are too low and as both segments drive upside to expectations throughout FY14, we believe JACK’s current discount to peers will narrow. Our price target is $60.”
  • Papa John’s International Inc. (NASDAQ: PZZA) – Peter Saleh, Director and Senior Restaurant Analyst, Telsey Advisory Group: “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. Domestically, we believe Papa John’s will continue to take market share with its digital platform, eventually leading to increased leverage (currently ~1.0x Debt/EBITDA), resulting in higher share repurchases and dividends. Our 12 month price target is $50.”
  • Starbucks Corporation (NASDAQ: SBUX) – Gregory Badishkanian, Managing Director and Senior Restaurant and Leisure Analyst, Citi Research: “Going into 2014, our top restaurant pick is SBUX. 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.”
  • Starbucks Corporation (NASDAQ: SBUX) – Mark Kalinowski, Restaurant Analyst, Janney Capital Markets: “Our BUY rating is driven by an expectation of continued solid U.S. same-store sales trends, potentially lower year-over-year coffee costs through fiscal 2017, and a large long-term worldwide single-cup opportunity. Our fair value estimate is $90.”

The best stock picks of 2013 as selected by ICR’s restaurant panel in January 2013 were Bravo Brio Restaurant Group, Inc. (NASDAQ: BBRG); Brinker International, Inc. (NYSE: EAT); Burger King Worldwide, Inc. (NYSE: BKW); Chipotle Mexican Grill, Inc. (NYSE: CMG); Del Frisco’s Restaurant Group, Inc. (NASDAQ: DFRG); Krispy Kreme Doughnuts, Inc. (NYSE: KKD); Panera Bread Co. (NASDAQ: PNRA); Red Robin Gourmet Burgers Inc. (NASDAQ: RRGB); and Starbucks Corporation (NASDAQ: SBUX).

About ICR
Established in 1998, ICR partners with companies to develop and execute strategic communications programs that achieve business goals, build credibility, and enhance the long-term value of the enterprise. The firm’s highly differentiated service model, which pairs capital markets veterans with senior communications professionals, brings deep sector knowledge and relationships to clients in more than 20 industries. Today, ICR is one of the largest and most experienced independent advisory firms in North America maintaining offices in Boston, Connecticut, Los Angeles, New York, San Francisco and Beijing.

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About ICR XChange
The ICR XChange 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 1,500.

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