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On Tuesday, JPMorgan has adjusted its outlook on Texas Roadhouse (NASDAQ:TXRH) by increasing the price target to $200 from the previous $184, while retaining a Neutral rating on the stock. The move follows Texas Roadhouse’s reported first-quarter 2025 comparable sales growth of 3.5%, which surpassed JPMorgan’s own forecast of 3.0%. The restaurant chain also demonstrated a same-store traffic increase of 1.1%, outperforming the essentially flat traffic within the Black Box Casual Dining sector. The stock has shown remarkable momentum, gaining nearly 11% in the past week and trading close to its 52-week high of $206.04. According to InvestingPro analysis, the stock’s RSI indicates overbought territory, suggesting investors might want to exercise caution at current levels.
The analyst at JPMorgan highlighted Texas Roadhouse’s strong customer value proposition as a key factor in its performance, which appears to be attracting customers in a market where consumer choices are increasingly discerning. Despite the company facing high prime costs, which include food and labor expenses amounting to 67.4% in the first quarter of 2025 and 66.5% for the full year 2024, these costs are being offset by the chain’s above-average annual unit volumes (AUVs). For the fiscal year 2024, Texas Roadhouse reported core-concept AUVs at $8.4 million. InvestingPro data reveals the company’s impressive revenue growth of 15.09% over the last twelve months, though its gross profit margin stands at 18.56%, reflecting these high operational costs.
The high prime costs at Texas Roadhouse are notably above the industry average, which typically ranges in the mid-50s to low-60 percentiles. However, the company’s strong AUVs are helping to cover these expenses. This financial dynamic is a testament to Texas Roadhouse’s ability to draw in customers consistently and maintain a loyal staff, which are both critical components of the company’s ongoing success.
The analyst’s remarks also suggest that Texas Roadhouse’s business model and operational strategy are yielding benefits. The brand’s focus on providing value to customers is not only reflected in its comp sales and traffic results but is also seen as a strategic advantage in managing the higher operational costs associated with its business.
In summary, Texas Roadhouse’s recent financial performance, coupled with its strategic positioning in the casual dining market, has led JPMorgan to revise its price target upwards, signaling confidence in the company’s ability to sustain its growth trajectory while managing above-average prime costs. With a market capitalization of $12.64 billion and a P/E ratio of 29.43, the stock currently trades above its InvestingPro Fair Value. Investors seeking deeper insights can access comprehensive analysis and 14 additional ProTips through InvestingPro’s detailed research report, available alongside 1,400+ other top US stocks.
In other recent news, Texas Roadhouse reported its first-quarter 2025 financial results, showing a mixed performance. The company’s revenues reached $1.45 billion, surpassing the consensus estimate of $1.44 billion, driven by a 3.5% increase in same-store sales. However, earnings per share (EPS) fell short of expectations, coming in at $1.70 compared to the anticipated $1.76. This shortfall was attributed to pressures on restaurant-level operating margins.
In response to the earnings report, Stifel raised its price target for Texas Roadhouse stock to $180 while maintaining a Hold rating, noting the company’s sales momentum despite challenges. Evercore ISI also adjusted its outlook, increasing the price target to $190 and retaining an Outperform rating, citing strong sales recovery and customer traffic growth. However, they noted potential cost pressures from increased wage and commodity inflation.
Benchmark maintained a Hold rating on the stock, pointing out the cost challenges despite positive sales trends. Texas Roadhouse has updated its commodity inflation forecast to 4%, reflecting expected increases in beef costs and tariffs. Despite these challenges, the company continues to focus on its core values and operational efficiency.
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