Momentum at Texas Roadhouse is bouncing back just in time for summer. The news Club stock Texas Roadhouse rose more than 1% to $194 each on Friday after UBS said both foot traffic and sales are picking up. UBS analysts, who expressed confidence after meeting with Texas Roadhouse management, expect to see sustainable outperformance going forward. American consumers’ confidence in the economy remains relatively low despite a more positive outlook for May. Fortunately for casual dining operator Texas Roadhouse, diners have still been coming through the doors, noted the analysts. UBS estimates a 5% increase in second-quarter to-date same-store sales, saying those kinds of numbers are “particularly encouraging” as “dining trends are seemingly normalizing to elevated levels.” UBS, which kept its buy rating, raised its price target to $220 per share from $200. TXRH YTD mountain Texas Roadhouse YTD Big picture It’s a nice turn of events for Texas Roadhouse after a disappointing first quarter led by bad weather and inflation. Thankfully, the warmer season is boosting business at Texas Roadhouse, especially as analysts noted that beef inflation headwinds are still weighing on the company’s earning potential. During its last earnings, Texas Roadhouse raised guidance on its commodity outlook to about 4%. Not too long ago, Texas Roadhouse had its back against the wall as pressure points mounted. In April, Citi downgraded Texas Roadhouse from a buy to neutral on concerns that same-store sales were slowing for reasons beyond weather. The analysts also said the company, which also owns the Bubba’s 33 and Jaggers casual dining chains, did not have enough catalysts to reverse competitive pressure from Brinker -owned Chili’s, which they said was favored among the Hispanic population. Around the same time, BTIG analysts also cited tariff risks as a potential threat to Texas Roadhouse’s plans to expand its locations. However, UBS analysts said the company is still on target to open 30 total new restaurants for the year — most of them are under the Texas Roadhouse banner. Bottom Line Jim Cramer, who has believed in Texas Roadhouse since initiating it in February, expects the stock to continue climbing. As shares moved lower in February and March, we continued to build our position. The Club made two well-timed buys in early April when all the tariff turmoil was hitting the markets and Texas Roadhouse was being unfairly dragged down. We knew all along that this largely domestic company was not going to be impacted much by tariffs. Sure, if inflation went up, that would have hurt. But so far, inflation in the economy has not spiked. And, as Club analyst Zev Fima reported on Friday, jobs are key for Texas Roadhouse. If the labor market holds up, potential diners should worry less about their jobs and feel OK going to Texas Roadhouse, which delivers value with great food at reasonable prices. Shares have gained 7.5% year to date. The stock on Friday was less than 5% below its record-high close of just over $205 per share back in late November. We also took some profits on May 13 at nearly $190. At the time, we kept our $195 price target but downgraded the stock to our hold-equivalent 2 rating to reflect the sale and recognize the move higher in the stock. (Jim Cramer’s Charitable Trust is long TXRH. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
