Restaurant Stocks: Will The Warm Winter Bring Strong Earnings?

The unusually mild winter weather may take a toll on industries that thrive on winter activity, such as ski resorts, but it has done wonders for the retail industry. In fact, many in the sector anticipate their first-quarter bottom lines to beat internal expectations.

Already, Home Depot reported that the warm weather helped to spur outdoor repair and home improvement purchases. And now restaurants are reporting the mild chill may improve first-quarter earnings.

The impact of cold or rainy weather on an individual’s willingness to walk or drive to a nearby store or restaurant can be severe, especially in the Southern regions, where snow is a rarity to begin with.

It serves to remind that last year's string of harsh winter storms paralyzed some retailers' bottom lines. Power outages destroyed perishable inventory and supply chains.

Howard Penney and Rory Green of Hedgeye report: "The average [snow] coverage across the United States so far this year was 28.54% versus 48.41% last year. Additionally, on the weekends ... the difference between 2011 and 2012 was consistent with the total picture. This is important as weekends are crucial to restaurants from a traffic perspective."

Restaurants with heavy exposure
Penny and Green examined snow coverage in the Midwest, Southern, and Coastal regions and its possible effects on the restaurant industry. Here are their speculations:

Midwest: This region saw average snow coverage drop from 51.19% last year to 16.45%. "Panera Bread Company (PNRA) and Buffalo Wild Wings (BWLD) are two companies with significant percentages of their system in this region ... We estimate that Panera and Buffalo Wild Wings have roughly 30% and 45% of their system units in this region, respectively." In addition, "Cracker Barrel (CBRL) is another concept heavily exposed to the Midwest, with roughly 35% of its system in the region."

Eastern Coastal: This region saw snow coverage drop from 19.61% last year to 2.65%. "We believe that Ruby Tuesday (RT) and Panera should benefit from the improved weather this year with roughly 33% and 22% of their systems in the region, respectively."

Southern Region: This region also saw snow coverage drop from an average of 19.61% last year to 2.65%. "PFCB and SONC are two companies that are set to see a 1Q benefit from this year-over-year improvement in weather in Texas. P.F. Chang's (PFCB) has 32% of its Pei Wei units in Texas. Sonic (SONC) and Chili's (EAT) have roughly 27% and 14% of their systems, respectively, in the Lone Star State."

Business section: Investing ideas
Interested in Penny and Green's winter weather theory? Here's a list of all the restaurants mentioned above. (Click here to access free, interactive tools to analyze these ideas.)

1. Buffalo Wild Wings (Nasdaq: BWLD  ) : Engages in the ownership, operation, and franchise of restaurants in the United States. Market cap of $1.61B.  Exhibiting strong upside momentum -- currently trading 10.54% above its SMA20, 23.28% above its SMA50, and 36.29% above its SMA200. The stock has had a good month, gaining 32.39%

2. Cracker Barrel Old Country Store (Nasdaq: CBRL  ) : Engages in the operation and development of the Cracker Barrel Old Country Store restaurant and retail concept in the United States. Market cap of $1.28B. The stock is a short squeeze candidate, with a short float at 9.23% (equivalent to 7.22 days of average volume). The stock has gained 14.12% over the last year

3. Brinker International: Develops, operates, and franchises various restaurant brands primarily in the United States. Market cap of $2.17B. The stock is a short squeeze candidate, with a short float at 12.98% (equivalent to 6.25 days of average volume). The stock has gained 19.42% over the last year

4. P.F. Chang's China Bistro: Engages in the ownership and operation of restaurants in the United States. Market cap of $826.96M.  The stock is a short squeeze candidate, with a short float at 19.99% (equivalent to 9.78 days of average volume). Exhibiting strong upside momentum -- currently trading 11.19% above its SMA20, 19.31% above its SMA50, and 19.88% above its SMA200. The stock has had a good month, gaining 20.57%

5. Panera Bread (Nasdaq: PNRA  ) : Operates, and franchises retail bakery-cafes in the United States and Canada. Market cap of $4.91B. The stock has gained 32.5% over the last year

6. Ruby Tuesday (NYSE: RT  ) : Develops, operates, and franchises casual dining restaurants in the United States, Puerto Rico, Guam, and internationally. Market cap of $513.43M. The stock is a short squeeze candidate, with a short float at 9.15% (equivalent to 10.41 days of average volume). The stock has lost 39.75% over the last year

7. Sonic (Nasdaq: SONC  ) : Operates and franchises a chain of quick-service drive-in restaurants in the United States. Market cap of $491.67M. The stock has had a good month, gaining 17.68%.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.

The Motley Fool owns shares of Panera Bread and Buffalo Wild Wings. Motley Fool newsletter services have recommended buying shares of Panera Bread and Buffalo Wild Wings. Motley Fool newsletter services have recommended writing covered calls on Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 02, 2012, at 9:40 PM, 1caflash wrote:

    Hi, Rebecca! I have no Sonic Shares but I Enjoy the Drinks and Some of the Food. Pardon me for not knowing how to format what is to follow. This is a poem which I have carried with me for over eleven years. "Back To The Roots Of Rock" by 1caflash. --------- "A lot of music we hear forgets familiar beats - Of songs from yesteryear when we cruised the streets - Although we try to keep up with the latest trends - Our favorite records and tapes remain old friends - As we remember such a special time - When our youthful embers were in their prime --- We're Going Back, Back, Way Back to the Roots of Rock - C'mon, Let's Go Back, Back, and Turn Back the Clock --- To days of: '57 Chevy's and pink Cadillacs - Lettermen's jackets with the names on their backs - Rockin' to the sounds of that wailin' sax - And dee-jays spinning those stacks of wax --- To days of: Doo-Wop singers you tried to imitate - Getting grounded for staying out too late - Wishing for a brand new birthday bike - Playing songs so loud that your folks didn't like --- ( 2nd main verse ) --- A world without rock would be a crime - So we'll keep on rollin' 'til the end of time - Until that day when they seal our fate - Give us the pumpin' sounds of those 88's - Let's flip the pages to previous rages - Take center stage no matter what your age is --- And we'll go Back, Back, Way Back to the Roots of Rock - C'mon, Let's Go Back, Back, and Turn Back the Clock --- To days of: Snuggling at the drive-in trying to keep warm - Friendly soda jerks in their sharp uniforms - Pretty car hops skating figure eights - Route 66 to the golden state --- To days of: Dressing up in those bobby sox - Setting your hair in cute little locks - Practicing dancing with dad or mom - Then stepping on toes at the high school prom --- ( Last main verse ) --- Through these many years we've loved their songs - The pioneers of rock have helped us along - We still like listening to oldies wherever we go - On the latest gadgets or the radio - We bought tons of music; helped make lots of stars - A major part of rock is Who We Are --- So --- Let's Go Back, Back, Way Back to the Roots of Rock - When We Go Back, Back, Watch Out for Culture Shock - 'Cause We're Going Back to the Roots of Rock --- Hey Baby, Hey!!" Thank You's go to everyone who has allowed this old guy to finally share his brainchild. "Fly away and Find Your Identity, Potential and Purpose in this Vast Universe. Please Don't Forget Me. Love, Dad."

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