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These Restaurant Stocks Could Benefit From Their U.S. Focus Post-Brexit

SBUX, WING, MCD, YUM, PBPB, JACK | June 27, 2016

Analysts at Baird issued a report on Monday where they shared their thoughts regarding the implications of the Brexit for the restaurants industry.

As per the research note, the experts believe their thesis on the group was not impacted by the U.K.’s departure from the EU, as most of the companies they cover have little to no direct exposure to European markets, except for McDonald's Corporation (NYSE: MCD), and to a lesser extent Yum! Brands, Inc. (NYSE: YUM) and Starbucks Corporation (NASDAQ: SBUX).

In fact, the analysts continued, it is probable that for the short term, sentiment toward U.S. restaurants ameliorates on a relative basis, as investors are likely to favor U.S.-focused businesses as overseas markets remain volatile.

Having said this, however, they pointed out one, key new risk: Volatility and uncertainty related to the Brexit could results in a pullback in U.S. consumer spending in months to come.

Some Favorite Names

In conclusion, what Baird is recommending is a “selective buying approach.” The firm maintains Outperform ratings on:

Wingstop Inc (NASDAQ: WING)
Starbucks
Panera Bread Co (NASDAQ: PNRA)
Zoe's Kitchen Inc (NYSE: ZOES)
Potbelly Corp (NASDAQ: PBPB)

These names were selected due to their earnings potential, based on a “top-line driven model,” according to the analysts.

The following were selected for their potential to retrieve a positive inflection in fundamentals over the next few quarters:

Jack in the Box Inc. (NASDAQ: JACK)
Habit Restaurants Inc (NASDAQ: HABT)
Buffalo Wild Wings (NASDAQ: BWLD)

Finally, Wingstop and Dunkin Brands Group Inc (NASDAQ: DNKN) were also selected, as they offer defensive business models and an attractive risk/reward profile.

Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.