Sometimes you’re the windshield, sometimes you’re the bug. That’s just how it goes in the stock market. The hottest industries can become a wasteland at the drop of a dime. Today’s Bear of the Day is a stock that was red hot in one of the hottest industries in the stock market, the restaurants. As things have cooled down for the industry, this stock has gone ice cold. I’m talking about Chuy’s Holdings (CHUY - Free Report) .
Chuy’s Holdings, Inc., through its subsidiary, Chuy’s Opco, Inc., owns and operates restaurants under the Chuy’s name in Texas and 16 states in the Southeastern and Midwestern United States. The company’s restaurants provide Mexican and Tex Mex inspired food. As of February 28, 2017, it owned and operated 82 full-service restaurants in 16 states.
Trust me, I love Tex Mex as much as the next guy but I don’t love stocks where analysts are slicing up earnings estimates. It’s not just happening here at Chuy’s though. The entire industry is now in the Bottom 27% of our Zacks Industry Rank. That means that several restaurant stocks are seeing their estimates slashed, not just Chuy’s.
The downside has been painful for Chuy’s as current quarter EPS estimates have dropped from 36 cents to 31 cents for the current quarter. This bearish behavior has also impacted current year and next year EPS numbers. While current year numbers have dropped from $1.13 to $1.09, next year’s number has plummeted from $1.25 to $1.16. That means virtually no EPS growth from this year to next year. These negative estimate revisions are the reason for the Zacks Rank #5 (Strong Sell) rating.
The negative EPS revisions have put shares of CHUY under pressure. After trading above $37 in July of last year, Chuy’s has traded as low as $21.59 in June of this year. The last time it traded above its 50-day moving average was May of this year. Shares have rallied some since bottoming out in June, approaching $25 in recent trade. Still, the negative momentum here continues to drag on the stock.
Investors looking for other restaurant stock ideas should check out Zacks Rank #1 (Strong Buy) stocks Dunkin’ Brands (DNKN - Free Report) and Red Robin (RRGB - Free Report) .
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