Analysts at JPMorgan downgraded Bloomin' Brands (NASDAQ:BLMN) to Neutral from Overweight and Cheesecake Factory (NASDAQ:CAKE) to Underweight from Neutral while raising Texas Roadhouse (NASDAQ:TXRH) to Neutral from Underweight in a note to clients Tuesday.
The BLMN price target was raised to $26 from $25, with the TXRH target lifted to $120 from $100 and the CAKE target cut to $33 from $34 per share.
The firm said in its note covering the restaurants and food service distribution sector that all signs point to a soft landing in the restaurant sector.
"Significant broad-based slowing in cost inflation has been matched with still present y/y menu price increases and buoyed by real income gains -particularly at the lower/middle-income customer cohorts," said the bank.
"Essential to our "soft landing ̇ thesis is the combination of modest y/y employment gains matched with a 10TSY that remains close to 4% (with current at 4.10%) to support valuations," they added.
JPMorgan said its in-market work at BLMN, "in addition to appreciating the operational acumen of recently added board member Dave George under a newly active Starboard position, suggests this business needs additional training & staffing + a streamlined menu with possibly lower prices to reassert its brand heritage."
The bank believes that CAKE's 16 brands under ownership lack the same shared service type scale benefits that are well used by DRI.
On TXRH, JPMorgan said it arguably has the most amount of room in the entire restaurant industry to improve its prime costs while it also has the best value proposition in the industry.