Please ensure Javascript is enabled for purposes of website accessibility

Why Texas Roadhouse Stock Is Up Today

By Lou Whiteman - Mar 13, 2020 at 3:23PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are hoping the downturn won't last as long as feared.

What happened

Shares of Texas Roadhouse (TXRH -0.13%) climbed more than 10% on Friday, reversing declines from previous days. Restaurants are sure to get clobbered by the COVID-19 coronavirus outbreak, but with Texas Roadhouse shares down more than 37% since Feb. 23, perhaps those losses could finally be priced in.

So what

It isn't hard to make the case for why restaurants will likely report miserable first-quarter results. The coronavirus outbreak is compelling consumers to stay at home, and eating out isn't likely to be front of mind.

The real questions are how long will the outbreak last, and will it have long-term economic repercussions. While the length of the outbreak is impossible to predict, Friday did bring some reasons for investors to hope that the economy will not be grounded for long.

A restaurant with an open for business sign at the door.

Image source: Getty Images.

The University of Michigan Consumer Sentiment Index released Friday did show a decline from month's end, but the fall was not as bad as economists had predicted, and the number is largely unchanged from the average for all of 2019. That suggests consumers are not ready to shove their cash into their mattresses, and demand could recover once the virus wanes.

The government is also taking steps to boost the economy. The New York Fed on Friday morning announced it would boost Treasury buying operations to try to support markets. And Treasury Secretary Steven Mnuchin told CNBC that the White House is close to a deal with Congressional leaders on a stimulus package.

Now what

It feels good to see green on the screen, but don't for an instant think the sell-off is definitely over. Negative headlines over the weekend about the stimulus package falling through or an uptick in new virus cases could easily spook markets and cause selling to resume on Monday.

There's no way for a restaurant to sugar-coat a pandemic, and Texas Roadhouse earnings are likely to suffer during the current quarter, if not beyond. But this is a strong operator with a good, long-term business. And once things return to normal, Texas Roadhouse should sizzle again.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Texas Roadhouse. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Texas Roadhouse, Inc. Stock Quote
Texas Roadhouse, Inc.
TXRH
$93.96 (-0.13%) $0.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.