Home Stock list Yum Brands and Darden top list of best restaurant stocks in Cowen

Yum Brands and Darden top list of best restaurant stocks in Cowen


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Cowen upgraded its list of most compelling picks in the restaurant sector as headwinds from inflation disrupted near-term earnings visibility. Analyst Andrew Charles said the company is looking for stories with upside same-store sales and/or development.

That led to Yum Brands (NYSE: YUM) being selected as the industry’s top pick with a development update later this year seen as a catalyst. Darden Restaurants (DRI) ranked second on the condemnation list with a potential update to 2023 earnings guidance later this year seen as a catalyst.

On YUM: “Yum stocks have broad investor appeal, offering a diversified stream of franchise income from a 98% franchised business model across 290 brand/country combinations. We like this investment profile in a challenging inflationary backdrop (40% of YUM sales) with limited visibility in relief.Additionally, we believe YUM represents a COVID-19 reopening game in emerging markets, which have arguably been hit harder by the pandemic than the developed world.

On DRI: “In short, we argue that the consensus underestimates the rigidity of the ToGo business, particularly at Olive Garden, which we expect to drive up same-store sales and the unit economy of ‘Olive Garden in 2023 to capitalize on industry inflationary pressures.’

Sweetgreen (SG), Chipotle (CMG) and McDonald’s (MCD) complete the list of top five restaurants in Cowen. Starbucks (SBUX) and Dutch Bros. (BROS) were dropped from the top five to drop further down the list.

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