While it may seem tempting to buy everything you can when the market bounces like it has the last couple of days, you have to maintain your discipline. By taking note of the Zacks Rank, you can stop yourself from buying story stocks without the earnings to back it up. Stocks which are Zacks Rank #4 (Sell) and Zacks Rank #5 (Strong Sell) often have earnings estimates which are going lower. Today’s Bear of the Day is one of those stocks. I’m talking about restaurant stock Texas Roadhouse (TXRH - Free Report) .
Texas Roadhouse, Inc., together with its subsidiaries, operates casual dining restaurants in the United States and internationally. The company operates and franchises Texas Roadhouse and Bubba's 33 restaurants. As of October 29, 2018, it owned and operated approximately 575 restaurants.
Texas Roadhouse is in the Restaurant industry which ranks in the Bottom 36% of our Zacks Industry Rank. It’s also currently a Zacks Rank #5 (Strong Sell). The reason for the unfavorable Zacks Rank lies in the recent negative earnings estimate revisions. Over the last sixty days, ten analysts have dropped their earnings estimates for the current year and next year. The bearish sentiment has cut down the Zacks Consensus Estimate for the current year from $2.33 to $2.19 while next year’s number has come from $2.66 to $2.53. The negative revisions are part of the reason why the stock has come down from over $75 in early September to the $58.73 level it closed at today.
There are several names in the restaurant industry which have more favorable Zacks Ranks. Among them are Zacks Rank #1 (Strong Buy) Habit Restaurants (HABT - Free Report) as well as Zacks Rank #2 (Buy) Bloomin’ Brands (BLMN - Free Report) . Investors looking for names in the same industry should investigate these names a little further.
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