Investopedia: Has A Bad Year Put Chipotle In Value Territory?

Although the dining industry is not exactly a high-growth industry in the traditional sense, investors have seen repeatedly that the right concept, bought at the right time, can deliver substantial capital gains. Chains such as Red Robin (Nasdaq:RRGB), Cheesecake Factory (Nasdaq:CAKE), Buffalo Wild Wings (Nasdaq:BWLD) and Panera (Nasdaq:PNRA) (and before Panera, its predecessor Au Bon Pain) have all had their runs, but maybe none quite like Chipotle Mexican Grill (NYSE:CMG).

Unfortunately for investors, many seemed to fall into the common trap that valuations didn't matter and Chipotle would always outgrow such tiresome concerns as valuation. With same store sales slowing significantly this year, the stock has tumbled on worries about that growth-value trade-off. While the valuation at Chipotle is as reasonable as it has been in some time, it's still not exactly cheap unless investors believe this company can essentially break the rules when it comes to future growth.

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Investopedia: Two More Reheats Heading To The IPO Market

Everything old is new again, and apparently everything taken private comes back to the public market sooner or later. Following in the shoes of Burger King Worldwide (NYSE:BKW), investors will soon see shares publicly trading again for CKE Restaurants (Hardee's/Carl's Jr parent) and Bloomin' Brands (Outback Steakhouse/Carrabba's/Bonefish Grill parent).While more investing options are generally a good thing for investors, it's worth asking what is inspiring restaurant owners to head to the public markets.

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Investopedia: Darden Hits A Dry Patch

As the economy continues to wobble along in the U.S., economically sensitive businesses like restaurants continue to face some significant challenges. Newer concepts like BJ's Restaurants (Nasdaq:BJRI) and Buffalo Wild Wings (Nasdaq:BWLD) continue to bring in the patrons, but many established chains are having to work harder and harder for even minor improvements in comp-store growth.

That puts Darden Restaurants (NYSE:DRI) in a tough spot. Darden is definitely a well-run veteran restaurant operator, but the company's core restaurants like Olive Garden and Red Lobster are hardly novel to the restaurant going public. With same-store sales coming in a little weak for the fiscal fourth quarter and the stock sporting a fairly robust multiple, it seems like this is a stock that is going to be stuck for at least a little while longer.

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Investopedia: Is There Still Time To Play The Rebound In Sanderson Farms?

Sanderson Farms (Nasdaq:SAFM) may be one of the best-run protein producers in North America, but that is not worth much to long-term investors, as big institutions run hot and cold on the shares based on the cyclical moves in poultry profitability. With the poultry market perhaps bottoming out and Sanderson's stock already off its lows, is there still time to play the eventual rebound in this business?


A Tough Second Quarter 
Sanderson definitely had a tough fiscal second quarter, but it could have been quite a bit worse. Revenue fell 2% this quarter (and rose almost 12% from the prior quarter) as increased production volume was offset by lower pricing. Although whole-chicken prices rose and leg-quarter prices increased on resumed Russian imports, boneless breast prices have been quite weak, and wing prices have plummeted.

At the same time, feed prices continue to march higher. Sanderson reported that feed costs rose 41%, and that pretty much corroborates what has been going on in the grain futures markets (chicken feed is usually about two-thirds corn and one-quarter soybean meal). Unlike Tyson (NYSE:TSN) and Pilgrim's Pride (NYSE:PPC), though, Sanderson Farms does not hedge grain exposure to a large degree.

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Investopedia: Chipotle Still Smokin'

Like the smoked jalapeno it's named after, Chipotle Mexican Grill (NYSE:CMG) offers more than just heat. Chipotle continues to post eye-popping traffic growth and strong margins, and there still looks to be plenty of expansion potential. It is also worth noting, though, that Chipotle sports a valuation that may be too spicy for even the boldest growth investors.


Another Great Quarter
Chipotle once again delivered impressive growth, exceeding the high end of the analyst range with 24% overall growth and nearly $510 million in revenue. While new store openings continue to be an important part of the story, the existing outlets are doing exceptionally well too - same-store sales growth was 12.4% for the first quarter, with higher pricing chipping in less than 1%. (For more, see Should Investors Ignore Monthly Sales?)

Profitability was a little more mixed, but still good news for the most part. Store-level margins contracted almost a full point, but still stand at an impressive 25.2%. Similarly, operating margin contracted a bit (from 15% to 14.7%), but operating income growth was still 22%. Growth was restrained a bit by promotional expenses tied to a buy-one-get-one-free offer, as well as higher food costs. 



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Sysco Still On Simmer

From an operational standpoint, the restaurant industry seems to be on the road to recovery. Companies like McDonald's (NYSE: MCD), Yum! Brands (NYSE: YUM) and Chipotle Mexican Grill (NYSE: CMG) are all seeing better traffic and lofty stock prices. The question, though, is whether food supply giant Sysco (NYSE: SYY) gets to share in the happy feelings.

A Dog's Breakfast In The First Quarter
Sysco's fiscal first quarter report does not really seem good enough for a company whose stock is near a 52-week high. Revenue rose more than 7% to $9.8 billion, and it did beat the consensus estimate, but the quality of the beat may be a worry to some. Food cost inflation was 3.3% in the quarter, and acquisitions and forex chipped in another 1.1% of the revenue growth. Volume growth, then, was on the order of 3% - not bad, but probably not enough to really get investors or analysts excited. 


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