Texas Roadhouse initiated with a Buy at Guggenheim on outsized unit growth

As previously reported, Guggenheim initiated coverage of Texas Roadhouse (TXRH) with a Buy rating and $130 price target. The multiple the firm is applying to its 2024 EPS estimate represents “a healthy premium to other full-service restaurant peers,” but Texas Roadhouse is growing units 4%-5% annually, which is above Darden’s (DRI) 2%-3% and roughly 0-1% for the entire full service category, the analyst tells investors. In addition, the brand has depressed store level margins and the firm believes that the roughly 20% price gap below Outback and LongHorn “leaves management with the optionality to take market share or pivot toward margin management,” the analyst added.