One of the first movers seeing an uptick in spending due to increased consumer confidence is the restaurant space. Only a few diehards really like to stay home and cook. Dining out is a great way to escape. Even better is going to a restaurant for a meal that's affordable.
The fact that dining has suffered during this recession is indicative of how bad things really have been.
Given that confidence is rising, it's no surprise then that Landry's Restaurants(NYSE: LNY) has almost tripled in value since hitting bottom in early March.
Baird upgraded Nike (NYSE: NKE) to Outperform from Neutral on expectations the company will benefit from the drop in the U.S. dollar and continued solid trends in athletic footwear. The firm raised its target on shares to $69 from $61.
Deutsche Bank upgraded Temple-Inland (NYSE: TIN) to Buy from Hold as it believes the company is well positioned for cyclical turnaround in the Paper/Building Products space. The firm raised its target on shares to $19 from $11.
Goldman upgraded Diageo (NYSE: DEO) to Buy from Neutral to reflect the current valuation and the company's exposure to emerging markets.
Deutsche Bank (NYSE: DB) was upgraded to Hold from Sell at ING Group.
Merriman upgraded NetApp (NASDAQ:NTAP) to Buy from Neutral after channel checks indicated the storage market is bottoming out in Q1. The firm thinks NTAP is well positioned heading into FY10 and could be an attractive takeout target for the likes of Hewlett-Packard (NYSE:HPQ), IBM (NYSE:IBM), or EMC (NYSE:EMC).
Goldman added Dr. Pepper Snapple (DPS) to its Conviction Buy list citing valuation and favorable U.S. soda trends. The firm has a $23 target on shares.
Baird said Inegrys Energy's (NYSE:TEG) decision to wind down or exit its profitable non-regulated energy marketing business lowers business risk and improves financial flexibility. The firm upgraded shares to Outperform from Neutral.
Yum! Brands (NYSE:YUM) was raised to Overweight from Neutral at JP Morgan.
The operator of more than 830 quick service Mexican restaurants said it earned $17 million, or 52 cents per share, in the quarter. That is compared to earnings of $17.5 million, or 53 cents per share, in the year-ago period.
Chipotle (NYSE: CMG) closed at $51.31. CMG is scheduled to report Q4 on February 11. CMG February call option implied volatility is at 82, puts are at 91; above its 26-week average of 57, according to Track Data, suggesting larger price movement. CMG puts are more expensive than puts because CMG is difficult to borrow.
Buffalo Wild Wings (NASDAQ: BWLD) closed at $22.67. BWLD, an operator and franchisor of 564 restaurants, is scheduled to report Q4 EPS on February 11. BWLD February 22 straddle is priced at $3.95, March 22 straddle is priced at $5.20. BWLD February option implied volatility is at 117, March is at 85; above its 26-week average of 80, according to Track Data, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
As the reigning king of the fast food industry, McDonald's Corp. (NYSE: MCD) has consistently demonstrated its adroitness in addressing changing economic conditions and consumer preferences.
The company's fourth-quarter earnings report provided a stark testimonial to the effectiveness of McDonald's strategy and management. Reporting earnings of 87 cents per share for the quarter, MCD exceeded the 2007 fourth-quarter results after adjusting for a 2007 tax bonus to earnings of 33 cents per share.
The company reported a 3% drop in revenues for the quarter. Excluding currency exchange rates, the global company reported an increase in revenues of 5% for the period.
With the economy in the toilet, a lot of people are reluctant to go and spend big on restaurant cuisine.
By itself that would be a good reason not to invest in restaurant companies. But restaurant stocks have been absolutely smoked of late, so you have to wonder how much of the bad news is already priced in. Take a look:
DineEquity (NYSE: DIN), parent company of IHOP and Applbee's: closed on Friday at $11.13, 83% off its 52-week high.
CKE Restaurants (NYSE: CKR), parent company of Carl Jr.'s and Hardee's: closed Friday at $8.88, 47% off its 52-week high.
Starbucks (NASDAQ: SBUX): closed Friday at $11.08, 59% off its 52-week high.
With very few exceptions, restaurant stocks have been pulvarized of late. It's true that the bad times may last awhile longer but in the grand scheme of things, a few quarters -- or even a few years -- of poor sales and earnings have very little bearing on the creation of long-term shareholder value. That is if a company is well-capitalized and has little leverage.
I think bargain hunters who buy and hold restaurant stocks trading at low price/earnings ratios with very little debt and strong brands will do quite well here.
One stock to avoid: DineEquity, which trashed its balance sheet with the Applebee's acquisition and may have to head back to the market to raise cash at the expense of current shareholders. The Wall Street Journalreports (subscription required) on unprecedented promotions and store closings for some leading chains.
With closings and consolidation, well-managed companies with good balance sheets should come out of this mess OK, and investors who get in at depressed prices should prosper.
Manic Monday on Wall Street Investors deal with a Lehman bankruptcy, the sale of Merrill Lynch to BofA, and a possible AIG restructuring. Mondays better not get any more manic than this. Wall Street's Perfect Storm - BusinessWeek
This post is part of our Ads Gone Bad series. Share your thoughts and memories of this ad in the comments, and be sure to check out our other posts on marketing gone wrong.
Restaurant giant Yum Brands (NYSE: YUM) owns and operates several popular fast food chains like Pizza Hut, KFC, A&W, and of course Taco Bell. The Taco Bell chain features lower quality, packaged ingredients, frozen meats, and poultry, and all at low prices. Fair enough, it's a fast food joint and the food overall is okay-to-good -- depending on one's mood!
The Taco Bell dog featured in the advertising campaign that ended in 2000 was a Chihuahua, an almost rat-like creature. Cute? Yes. Annoying? Yes. I know because my family has a Chihuahua we call Gracie! The Hispanic community felt that the Chihuahua represented an ethnic stereotype. The dog was voiced-over with a Hispanic accent and the implication was very clear. Many Hispanics were especially annoyed because they do not consider Taco Bell's food authentic "home cooking."
Oppenheimer upgraded shares of Shanda Interactive (NASDAQ: SNDA) to Outperform from Perform following the company's better-than-expected quarter to reflect its growth acceleration in the casual games platform and margin improvements.
SAIC (NYSE: SAI) was upgraded to Outperform from Market Perform following the solid Q2 report and guidance.
Susquehanna upgraded Zumiez (NASDAQ: ZUMZ) to Positive from Neutral citing positive August comps, revised merchandising, easier comps, and solid financial position.
Novellus (NASDAQ: NVLS) was raised to Overweight from Equal Weight at Morgan Stanley.
Analyst downgrades:
Morgan Stanley downgraded the Semiconductor Capital Equipment sector to In-Line from Attractive citing optimistic expectations for Q4 orders following the recent bounce in stocks. The firm downgraded Lam Research (NASDAQ: LRCX) to Underweight from Overweight and KLA-Tencor (NASDAQ: KLAC) KLAC to Equal Weight from Overweight.
U.S. stock futures were lower Friday morning, a day after a selloff triggered by housing data. Today investors are bracing for more housing data at 10:00 a.m. EDT after already hearing that foreclosures soared 121% during the second quarter. Other point of interest will be durable goods data reported an hour before the opening bell. Meanwhile, oil continued the steady climb that started Thursday as the dollar weakens, trading above $126 a barrel. It's Friday, and no many earnings reports are due.
While there aren't many earnings reports today, there are a few including Fortune Brands (NYSE: FO), Netflix (NASDAQ: NFLX) and Black & Decker (NYSE: BDK) among others.
Crocs (NASDAQ: CROX) shares are tanking over 44% to $5 after after it cut its earnings outlook significantly on softer demand for its plastic shoes. With all those knockoffs around, is it any wonder? Robert W. Baird downgraded Crocs from Outperform to Neutral, slashing the target price from $21 to $5.
Meanwhile, Juniper Networks (NASDAQ: JNPR) surged 12% in premarket trading after the company not only beat estimates when reporting quarterly results Thursday, but also increased its sales forecast for the third-quarter much higher than analyst estimates. Friedman Billings and Citigroup both upgraded Juniper to Outperform and Buy respectively.
In deal news, Clear Channel Communications (NYSE: CCU) shareholders on Thursday approved a $17.9 billion takeover by private equity funds Thomas H. Lee Partners and Bain Capital. This ends the 20-month long effort.
This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
The most impressive game-changer story in the fast food industry over the past 50 years is indisputably McDonald's (NYSE: MCD). Founder Ray Kroc was a visionary and pioneer in serving customers hot fast food at a reasonable price. Thirty thousand units later, McDonald's is still a growth story. But the better growth story is Chipotle Mexican Grill (NYSE: CMG), so much so, in fact, that McDonald's was an early investor in Chipotle! (McDonald's no longer owns shares of Chipotle.)
McDonald's went through some execution issues in the mid-1990s through 2003. The fast food industry was taking some hits from nutritionists, and the quality of food was suspect. McDonald's re-tooled its entire operation from store front to menu offerings. The standard hamburgers and those delicious french fries are still on the menu, but McDonald's has added a variety of salads, wraps and other healthier options. In the past five years the stock has nearly tripled in value, validating McDonald's make-over.
Chipotle, founded in 1993, has not had to re-tool or redefine itself. The freshest of ingredients, naturally raised poultry and beef are highlights of the limited, but superb menu. Chipotle is a favorite of almost every demographic group, from teenagers to the elderly. Chipotle has succeeded in offering the finest fresh Mexican food, but not at the cheapest price. The average ticket at Chipotle comes in near $9. The company recently raised prices at different levels depending on geography. Sales have not slowed a bit in spite of the price increases.
Three types of raw tomatoes -- red plum, red Roma and round red tomatoes -- grown in 17 states are voluntarily being pulled of the shelves and menus of McDonald's (NYSE: MCD), Wal-Mart (NYSE: WMT), Burger King (NYSE: BKC), Kroger (NYSE: KR), Outback Steakhouse, Winn-Dixie (NYSE: WINN) and Taco Bell, among others. In fact, "McDonald's has stopped serving sliced tomatoes on its sandwiches as a precaution, but will continue serving grape tomatoes in its salads because no problems have been linked to that variety."
Similarly, Burger King, Yum Brands Inc. (NYSE: YUM) restaurants, Darden Restaurants (NYSE: DRI), and Chipotle Mexican Grill Inc. (NYSE: CMG) have also removed the contaminated brands from their menus across the U.S., and some, like Burger King, in Canada, Puerto Rico and some other Caribbean islands as well. Many left the non-contaminated brands on the menu.
MOST NOTEWORTHY: Ascent Solar, Xcorporeal and Chipotle Mexican Grill were today's noteworthy initiations.
Cowen said Ascent Solar Technologies Inc.'s (NASDAQ: ASTI) unique thin-film solar technology is well suited for integrated applications. Shares were started with an Outperform rating.
Roth Capital believes Xcorporeal Inc (AMEX: XCR) is targeting a large, unmet market, as the firm notes that 500K patients are expected to receive kidney therapy over the next few years. Roth, which initiated shares without a rating, anticipates that the company will obtain regulatory approval for the home therapy and critical care markets during the next few quarters, possibly creating a catalyst for the stock to appreciate.
JP Morgan initiated the Class B shares of Chipotle Mexican Grill Inc (NYSE: CMG.B) with an Overweight rating as they believe the recent pullback provides a compelling entry point.
OTHER INITIATIONS:
Lehman initiated NCR Corporation (NYSE: NCR) with an Overweight rating and $30 target.
One of the first movers seeing an uptick in spending due to increased consumer confidence is the restaurant space. Only a few diehards really like to stay home and cook. Dining out is a great way to escape. Even better is going to a restaurant for a meal that's affordable.
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U.S. stock futures were lower Friday morning, a day after a selloff triggered by housing data. Today investors are bracing for more housing data at 10:00 a.m. EDT after already hearing that 
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