June 12, 2019 / 9:17 AM / 4 months ago

REFILE-BUZZ-U.S. restaurants: Evercore favors companies with franchise growth model

(Corrects to remove extraneous word from headline)

** Evercore starts coverage on U.S. restaurant chains amid the sharp divergence in trends with fast food accelerating as casual dining fades

** McDonald’s, Restaurant Brands, Chipotle Mexican Grill, Yum Brands and Darden Restaurants top picks; brokerage starts coverage with “outperform”

** Slaps “in-line” coverage on Wendys, Starbucks , Brinker International, Dunkin’ Brands and Texas Roadhouse

** Lead Evercore analyst David Palmer cites modest stock upside for franchised growth-and-income companies like MCD, YUM, QSR, and expectation of premium growth for CMG

** It adds that McDonald’s, Yum Brands and Chipotle have above-consensus momentum domestically with additional strength overseas, says QTD momentum in fastfood is underappreciated

** Restaurants do not face “existential Amazon threat and death of impulse channel risk;” leading private buyers to admire the business’ cash flow stability, says Evercore, adding that M&A theme is likely to continue in 2020

** Brokerage says SBUX’s latest China results quell fears that company’s China business will be increasingly impacted by growing competitive pressures from Luckin Coffee and Tim Hortons

** TXRH’s stock is near fair-value and have mixed feelings about company’s near-and medium-term earnings drivers, due to lack of clarity amid rising protein inflation risks, ongoing labor inflation and slowing industry growth (Reporting by Karina Dsouza in Bengaluru)

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