KeyBanc Starts Coverage on Several Major Restaurant Stocks (CBRL, DRI, EAT)

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Analysts at KeyBanc on Friday offered some initial commentary on a few major stocks in the full-service restaurant sector.

Cracker Barrel Looks Attractive
The firm initiated coverage on Cracker Barrel Old Country Store, Inc. ( CBRL ) with a "Buy" rating and $75 price target, suggesting a 20% upside to the stock's Thursday closing price of $62.52.

A KeyBanc analyst commented, "We believe estimates and valuation underestimate CBRL's ability to drive upside to its 12-15% EPS growth target during the next few years. Visible top-line drivers, tight cost controls and significant capital deployment opportunities should lead to results ahead of the Street's $4.64 EPS estimate for FY13. Moreover, nervous sentiment toward the activist shareholder, Biglari Holdings, creates a buying opportunity."

Darden Just a "Hold"; Limited Downside, but No Catalysts
KeyBanc started coverage on Darden Restaurants, Inc. ( DRI ) with a "Hold" rating on Friday. The firm commented, "Same-restaurant sales ( SRS ) improving at Olive Garden is unlikely before 2H13, or when several new menu and advertising changes are implemented. Moreover, we believe near-term EPS estimates may be too aggressive. However, the stock price downside risk is limited, in our opinion, as easing commodity prices and unit growth should contribute meaningfully to EPS growth in FY13, and investors can receive a 4% annual dividend yield."

Brinker Int'l a "Buy"; Strong EPS Growth Expected
Finally, KeyBanc initiated coverage on Brinker International, Inc. ( EAT ) with a "Buy" rating and $40 target, implying a 26% upside to the stock's Thursday closing price of $31.77.

The analyst commented, "Chili's is well-positioned to grow EPS in the 17-20% range for the next few years fueled by at least 3% SRS gains, 1-2% unit growth, 150 bps of margin expansion during the next two years, and 5-7% of annual share count reduction. The Street's 15% EPS growth projection for the next few years will likely prove conservative as SRS gains, coupled with cost improvements, deliver better than expected profit growth, which in turn provides greater capacity for share repurchases."

The Bottom Line
Shares of Cracker Barrel ( CBRL ) have a 2.56% dividend yield, based on last night's closing stock price of $62.52. The stock has technical support in the $55-$58 price area. The shares are trading near all-time highs. Shares of Darden Restaurants ( DRI ) have a 3.98% dividend yield, based on last night's closing stock price of $50.20. The stock has technical support in the $46-$48 price area. The stock is trading near the all-time high level of $54 a share. Shares of Brinker International ( EAT ) have a 2.01% dividend yield, based on last night's closing stock price of $31.77. The stock has technical support in the $28-$29 price area. The stock is trading near the all-time highs of $33-$34 a share.

None of the dividend stocks mentioned in this article are currently recommended by Dividend.com.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Stocks

Referenced Stocks: CBRL , DRI , EAT , SRS

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