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News You Can Chew On

By Rick Munarriz - Updated Apr 5, 2017 at 8:04PM

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Restaurant stocks are turning tables and headlines.

There always seems to be restaurant news on the menu. As I do every week, let's take a look at some of this week's more appetizing stories.

1. Living up to its name
Fast food giant Yum! Brands (NYSE:YUM) isn't slowing down. The company behind the Taco Bell, KFC, and Pizza Hut concepts issued its guidance for 2009. Yum! sees earnings growing by at least 10% next year, making it the eighth consecutive year of double-digit growth on the bottom line. It also reiterated its original target of 12% in earnings-per-share growth, before special items, here in 2008.

Comps are also holding up in the current quarter, trending toward a 2% gain domestically across all of its concepts, and a healthier 3% spurt for its company-owned units.

2. John's back
Founders coming back as CEOs are becoming common in the tech world, so now even the eatery space is giving it a crack. John Schnatter -- the John in Papa John's (NASDAQ:PZZA) and the "better ingredients, better pizza" guy from the ads -- is returning as interim CEO. Schnatter is filling in for Nigel Travis, who is stepping down after a three-year stint.

3. Hard prizes at Hardee's
CKE Restaurants (NYSE:CKR) won't announce quarterly results until next week, but it's in the news this morning with its new Rev It Up instant win game. Patrons at its Hardee's and Carl's Jr. burger joints will receive play pieces with every large combo or beverage purchase.

The promo is tied to the Rev Theory rock band, and so are many of the prizes. Instant winners may score prizes like dinner with the band (at a Carl's Jr. or Hardee's, of course), signed guitars, or an appearance in an upcoming video.

4. Analysts gone wild
Given the perpetually sinking stock prices, analysts find themselves hacking away at near-term price targets to remain reasonable. UBS analyst David Palmer is lowering his price targets on Darden (NYSE:DRI), Burger King (NYSE:BKC), and Brinker (NYSE:EAT).

It's not all bad news. In fact, Palmer is actually upgrading shares of Darden -- the company behind Olive Garden and Red Lobster -- from Neutral to Buy. He's encouraged by Red Lobster's new wood-grilled menu, but not that excited. Lowering his price target on the stock from $29 to $20 is a steep slice, and not that far from the $17.04 price that the shares were fetching just before his Wednesday morning update. Even worse for investors looking to get in now, the stock has already made up more than half of the difference between $17.04 and $20 over the past two trading days.

5. Like a virgin
Palmer isn't the only one cutting into Burger King these days. Skepticism is percolating over the company's new Whopper Virgins campaign and it hasn't even officially started.

The world's second largest burger chain's new marketing message is going to be controversial. BK scoured the globe, trekking off to remote regions within Thailand, Greenland, and Romania, giving rural locals their first taste of a Whopper.

Filming folks who have never sampled a burger going through a taste test between a Whopper and a Big Mac may seem like a good idea at first. They have unbiased palates. However, even with Burger King issuing a press release this week detailing how it has donated educational and medical supplies to the areas depicted in the ads, critics are going to argue that feeding locals with limited diets a pair of fatty burgers is exploitation.

Juicy, succulent, flame-broiled exploitation.      

6. More change in your pocket
Who says restaurant stocks are fickle? Frisch's Restaurants (NYSE:FRS) declared a $0.12-a-share quarterly dividend this week. It may not seem like too big a deal, but the company has now paid out 192 consecutive quarterly dividends.

Yes, that takes you all the way back to the company's IPO in 1960. Frisch's also points out that is has posted a profit every year since going public. Yes, the company behind the Big Boy concept is as consistent as it is timeless.

Check out this week's dessert specials:

Longtime Fool contributor Rick Munarriz is the rare foodie that embraces restaurant chains. He does not own shares in any of the companies in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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Stocks Mentioned

Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
$119.18 (1.92%) $2.25
Brinker International, Inc. Stock Quote
Brinker International, Inc.
$30.31 (5.72%) $1.64
Darden Restaurants, Inc. Stock Quote
Darden Restaurants, Inc.
$129.88 (3.25%) $4.09
Papa John's International, Inc. Stock Quote
Papa John's International, Inc.
$90.83 (0.11%) $0.10

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

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