KeyBanc Upgrades Chuy's Holdings (CHUY) to Buy

KeyBanc upgraded Chuy's Holdings (NASDAQ: CHUY) from Hold to Buy with a price target of $34.00.

Analyst Christopher O'Cull said, "Upgrading Chuy's Holdings, Inc. (CHUY-NASDAQ) to BUY from HOLD based on our belief additional menu pricing providing better earnings visibility, the likelihood new store margin will show sequential improvement in the 3Q and year-over-year improvement in the 4Q, and our view the current discounted valuation following a 21% pullback in the share price quarter-to-date (vs. KBCM Restaurant Index down 4%) reflects expectations of softer new store margin. Our 2014 EPS estimate of $0.76 is unchanged, and we raise our 2015 EPS estimate to $0.92 from $0.89."

"1) We are more confident in EPS and cash flow outlook. Based on our channel checks, it appears the Company raised menu prices roughly 1.5-2% in August, which should equate to 2-2.5% higher prices in the 3Q and 3-3.5% in the 4Q (vs. ~1.5% in 1H14). We believe the impetus behind this unexpected price increase was persistently high commodity inflation, which appears to be running north of the Company's expectations for 2H14. 2) We find valuation compelling. CHUY is currently trading at 1.8x EV/NTM Sales (vs. the high-growth peer average of 2.2x) and an adjusted EV/EBITDA of 13x (vs. peers at 14x)," he added.

For an analyst ratings summary and ratings history on Chuy's Holdings click here. For more ratings news on Chuy's Holdings click here.

Shares of Chuy's Holdings closed at $28.75 yesterday.

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