Broker views: It’s all about food

Yesterday’s results from Restaurant Group (LON:RTN) appeared to be well received by the City’s brokerage firms.

N+1 Singer upgraded its recommendation on the Frankie & Benny’s and Garfukel’s owner to buy (from hold) saying it has come off the fence and that it likes the strategic review and well thought out initiatives to revive the business.

The broker added: “Recovery will take time but we feel there are some early green shoots in the form of the success of the trial Frankie & Benny’s menu.”

N+1 hiked its target price to 415p (from 350p).

Citigroup and Liberum both reaffirmed buy ratings, with targets lifted to 425p (from 345p) and 430p (from 400p), respectively.

Citi commented: “We think new CEO Andy McCue has laid out a sound plan for the group’s turnaround.”

Liberum said that the strategy was confident and well communicated, with management also “pragmatic and honest in the scale of the task ahead”.

JP Morgan stuck with its neutral call but increased its price target slightly to 340p (from 330p).

The shares are up nearly 13% since yesterday’s results.

Sticking with food, Peel Hunt cut its recommendation on Domino’s Pizza Group (LON:DOM) and moved to hold (from add), its second downgrade for the stock in little over a week, following today’s final results.

The broker explained that, while it had already said it didn’t expect LFL sales to grow by double-digits forever, it did not expect LFL sales to fall below its 3% forecast assumption.

Analysts cut their target price to 400p (previously 430p).

Meanwhile, N+1 Singer stuck with its hold rating on the pizza delivery group, saying the “shares are likely to come under some pressure given the soft start and the fact that forecast momentum is becoming less of a feature”.

The broker wasn’t wrong. The shares were down by around 14%, in mid-afternoon trading.

N+1 added: “The main focus this morning we feel will be the muted start to FY17 in the UK with LFL sales growth of only 1.5% after 9 weeks, albeit against a stiff 11% comp.”

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