Buckingham Research Cuts Price Target on Zoe's Kitchen, Inc. (ZOES) Following 2Q and Guide Down
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Buckingham Research maintained a Buy rating on Zoe's Kitchen (NYSE: ZOES), and cut the price target to $37.00 (from $45.00), following the company's 2Q earnings report. Comparable-restaurant sales grew 4% vs. the Street's estimates at ~5%. EPS was $0.06, in-line with the Street's estimate and ahead of $0.05 LY. However, trends have slowed further into 3QFY16 and ZOES trimmed guidance.
Analyst John Zolidis commented, "We reduce our price target to $37 (from $45) but maintain our BUY rating on shares of Zoe’s Kitchen (ZOES) after 2QFY16’s miss/guide-down. Comps slowed to 4% in 2QFY16 (consistent with our MSD expectations) but have further decelerated to +LSD in 3QFY16. After 26 consecutive quarters of MSD-LDD growth our inclination is to view the deceleration as a lull rather than the beginning of the end of the concept. That said, it is difficult to have a high degree of conviction. We also note that rising labor and the end of favorable commodity prices will likely cause margins to ease lower NY even with a modest reacceleration in sales growth. This means that the risk associated with betting on resumption of growth is elevated. Nevertheless, we are sticking with our original assessment that this is a good, differentiated concept, with strong economics and a very attractive LT growth opportunity. We would use weakness to buy but would maintain appropriately-sized positions. We see 40% upside/56% downside in our best/ worst case scenarios."
Shares of Zoe's Kitchen closed at $37.25 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst EPS View, Analyst PT Change
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