Key Takeaways QSR sees near-term margin pressure as Burger King U.S. faces high-teens beef cost inflation.QSR views beef inflation as cyclical, tied to herd rebuilding, with signs that costs may be peaking.Restaurant Brands International relies on efficiencies and value, avoiding sharp price hikes.Rising beef costs have re-emerged as a talking point for quick-service restaurants, raising questions about whether margin pressure is structural or merely cyclical. Management commentary from Restaurant Brands In ...

Industry Overview - The restaurant business and food industry experienced a volatile year due to weak consumer sentiment and tariffs [1] - Value deals and discount campaigns have shown some success in revitalizing brands, but many still face challenges [1] Key Factors to Watch - Commodity inflation, particularly beef prices, will be a significant factor, especially for company-operated fast-casual chains like Chipotle and steak players like Texas Roadhouse [2] - Demand destruction in supermarkets could positively impact companies like Texas Roadhouse and Darden, which spend significantly on beef [3] - The net effect on middle-income consumers will be crucial, with potential consumer engagement expected by the second quarter of 2026 [3] Investment Opportunities - The dining space looks promising, even considering headwinds from GLP1s; casual dining is less affected by negative factors and benefits from early tax relief [4] - Brinker, with its strong execution and value offerings, is a favored name, along with Darden [5] - Value players within the fast-food sector may perform well; McDonald's is mentioned as a GARP (Growth at a Reasonable Price) name [5]

Financial Data and Key Metrics Changes - The company reported revenue growth of 12.8% for the third quarter, driven by a 5.5% increase in average weekly sales and 6.8% store week growth [16] - Diluted earnings per share decreased by 0.8% to $1.25, while restaurant margin dollars increased by 1.1% to $204 million [16][17] - Average weekly sales were over $157,000, with to-go sales representing approximately 13.6% of total weekly sales [16] Business Line Data and Key Metrics Changes - All three brands (Texas Roadhouse, Bubba's 33, and Jaggers) delivered same-store sales growth, with Texas Roadhouse averaging nearly $162,000 in weekly sales [12] - Bubba's 33 averaged $119,000 in weekly sales, while Jaggers exceeded $75,000 [12] - Comparable sales increased by 6.1% in the third quarter, driven by 4.3% traffic growth and a 1.8% increase in average check [16] Market Data and Key Metrics Changes - The company opened seven company-owned locations in the third quarter and plans to open approximately 30 restaurants across three brands in 2025 [7] - Franchise partners opened two international Texas Roadhouse restaurants during the third quarter, with plans for one more in the fourth quarter [7] - The company expects to open approximately 35 company-owned restaurants in 2026, including 20 Texas Roadhouse, 10 Bubba's 33, and up to five Jaggers [7] Company Strategy and Development Direction - The company maintains a people-first focus, value proposition, and operational excellence as key components of its long-term success [6] - The company is committed to expanding its restaurant base while driving top-line growth through guest traffic [10] - The company is also focusing on enhancing its retail presence, with products available in over 120,000 retail outlets [9] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer behavior remains strong, with no noticeable change following a 1.7% menu price increase [8] - The company is setting initial 2026 commodity inflation guidance at approximately 7%, with expectations of volatility in beef prices [13] - Management expressed confidence in the long-term health of the business, emphasizing a commitment to its mission and values [11] Other Important Information - The company ended the third quarter with a cash balance of $108 million and cash flow from operations of $144 million [14] - Capital expenditures for 2026 are expected to be approximately $400 million, excluding the cost of acquiring California franchise restaurants [15] Q&A Session Summary Question: Clarification on beef inflation outlook - Management indicated that beef inflation might be in the mid-teens if the overall commodity basket is up in high single digits, with expectations based on current trends [23][26] Question: Confidence in transitory vs. structural beef pricing - Management believes the current beef pricing situation is cyclical and transitory, based on industry insights [34][35] Question: Consumer behavior by income and age cohort - Management noted no significant differences in consumer behavior by income or age cohort, emphasizing the value offered across the menu [38][40] Question: Pricing philosophy and managing partner compensation - Management stated that compensation is tied to sales and profits, and they will continue to monitor and adjust as necessary [46][48] Question: Restaurant profit dollars and inflation impact - Management acknowledged the decline in restaurant profit dollars per location and indicated a conservative approach to pricing to protect margins [55][58] Question: New customer acquisition and competition - Management believes they are attracting customers from various segments, including higher-end steakhouses and QSRs, due to their reputation and dining experience [62][64] Question: Franchise acquisitions and CapEx balance - Management confirmed ongoing conversations for franchise acquisitions and explained that CapEx for 2026 is comparable to 2025 due to efficiency in openings [76][78]

Financial Data and Key Metrics Changes - The company reported revenue growth of 12.8% for the third quarter, reaching over $1.4 billion, driven by a 5.5% increase in average weekly sales and 6.8% store week growth [16][6] - Diluted earnings per share decreased by 0.8% to $1.25, while restaurant margin dollars increased by 1.1% to $204 million [16][12] - Comparable sales increased by 6.1%, supported by a 4.3% traffic growth and a 1.8% increase in average check [16][12] Business Line Data and Key Metrics Changes - Texas Roadhouse averaged nearly $162,000 in weekly sales, Bubba's 33 averaged $119,000, and Jaggers averaged over $75,000 [12] - The company opened seven company-owned locations in the third quarter, including two Bubba's 33 and one Jaggers, and plans to open approximately 30 restaurants across three brands in 2025 [7][8] Market Data and Key Metrics Changes - The company has seen a positive consumer response to its beverage offerings, including mocktails and regional beverage menu items [8][9] - The to-go business continues to show solid momentum, with operators focusing on speed and order accuracy [9] Company Strategy and Development Direction - The company aims to maintain its focus on driving top-line growth through guest traffic and restaurant expansion, while also investing in employee development to remain an employer of choice [10][11] - The company plans to acquire its remaining California franchise locations at the beginning of 2026 and expects franchise partners to open 10 new restaurants [8][15] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation in the third quarter was higher than expected due to beef prices, updating the full-year 2025 commodity inflation guidance to approximately 6% [12][13] - The company remains optimistic about its long-term success, emphasizing its people-first focus and operational excellence [6][11] Other Important Information - The company ended the third quarter with a cash balance of $108 million and cash flow from operations of $144 million, offset by $214 million in capital expenditures, dividend payments, and share repurchases [14][15] - The company is establishing its initial 2026 capital expenditure guidance at approximately $400 million, excluding the cost of acquiring California franchise restaurants [15] Q&A Session Summary Question: Clarification on beef inflation outlook - Management indicated that they expect mid-teens beef inflation if the commodity basket is up high single digits, with a focus on managing pricing strategies [23][25] Question: Confidence in beef pricing being transitory - Management believes the current beef pricing situation is cyclical and transitory, based on industry insights and cattle cycles [33][34] Question: Consumer behavior by income cohort - Management noted no significant differences in consumer behavior by income or age cohort, emphasizing the value offered across the menu [37][39] Question: Pricing philosophy and managing partner compensation - Management discussed their conservative pricing approach to protect top-line growth and ensure fair compensation for managing partners [44][46] Question: Unit growth and market expansion for Bubba's - Management confirmed that most growth for Bubba's will occur in existing markets, with a focus on maintaining strong partnerships [86][88] Question: Cash uses and franchise acquisitions - Management stated that approximately 30 franchises remain for potential acquisition after completing the California acquisition [75][76] Question: Labor and operating expenses outlook - Management expects continued leverage on labor and operating expenses if top-line trends remain strong [81][82] Question: Impact of grocery store beef prices on customer behavior - Management acknowledged that high grocery store beef prices are likely driving customers to dine out more, recognizing the value of their steak offerings [84][85]

Financial Data and Key Metrics Changes - The company reported revenue growth of 12.8% for Q3 2025, driven by a 5.5% increase in average weekly sales and 6.8% store week growth [13] - Diluted earnings per share decreased by 0.8% to $1.25 [13] - Restaurant margin dollars increased by 1.1% to $204 million, while restaurant margin as a percentage of total sales decreased by 168 basis points year-over-year to 14.3% [15][16] Business Line Data and Key Metrics Changes - Texas Roadhouse averaged nearly $162,000 in weekly sales, Bubba's 33 averaged $119,000, and Jaggers averaged over $75,000 [10] - Comparable sales increased by 6.1% in Q3, with traffic growth of 4.3% and an average check increase of 1.8% [13] - The to-go business represented approximately 13.6% of total weekly sales, averaging $21,500 [13] Market Data and Key Metrics Changes - The company opened seven company-owned locations in Q3, including two Bubba's 33 and one Jaggers, and plans to open approximately 30 restaurants across three brands in 2025 [5][6] - Franchise partners opened two international Texas Roadhouse restaurants during Q3 and plan to open ten new restaurants in total, including six international locations [6] Company Strategy and Development Direction - The company aims to maintain a people-first focus, operational excellence, and a strong value proposition to drive long-term success [4] - The company is on track to open approximately 35 company-owned restaurants in 2026, including 20 Texas Roadhouse, 10 Bubba's 33, and five Jaggers [6] - The company continues to invest in technology, with 95% of restaurants using a digital kitchen and upgraded guest management systems [8] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer behavior remains strong, with no noticeable change in guest behavior following a 1.7% menu price increase [6] - The company expects commodity inflation to be approximately 6% for 2025 and 7% for 2026, with significant volatility in beef prices anticipated [10][11] - Management remains optimistic about maintaining top-line growth through guest traffic and restaurant expansion despite inflationary pressures [8][9] Other Important Information - The company ended Q3 with a cash balance of $108 million and cash flow from operations of $144 million, offset by $214 million in capital expenditures, dividend payments, and share repurchases [11] - The company is prioritizing new store development and maintaining existing restaurants, with capital expenditure guidance set at approximately $400 million for 2026 [12] Q&A Session Summary Question: Outlook for beef inflation and beverage program - Management indicated that beef inflation is expected to be in the mid-teens, with a focus on mocktails and beverage offerings to cater to changing consumer preferences [21][26] Question: Confidence in beef inflation being transitory - Management believes the current beef inflation is cyclical and transitory, based on industry insights and purchasing department evaluations [32][34] Question: Consumer trends by income and age cohort - Management noted no significant differences in consumer behavior by income or age cohort, attributing strong traffic growth to the value offered [36][38] Question: Pricing philosophy and impact on compensation - Management emphasized a conservative pricing approach to protect top-line growth and manage partner compensation effectively [44][46] Question: Restaurant profit dollars and inflation management - Management acknowledged the decline in restaurant profit dollars per location but remains confident in long-term growth strategies [52][56] Question: New customer acquisition and competition - Management believes they are attracting customers from various segments, including higher-end steakhouses and QSRs, due to their quality offerings and restaurant experience [60][61] Question: Franchise acquisitions and CapEx balance - Management confirmed ongoing conversations for franchise acquisitions and explained that capital expenditures remain stable despite increased openings due to efficiency [71][74]

Core Insights - The company has experienced sequential growth in same restaurant traffic and sales for four consecutive quarters, with a 2.6% increase in traffic for the latest quarter [4][3] - The restaurant level operating profit margin improved to 19.7%, up from 18.9%, indicating effective management of commodity costs [3] - Despite a 5% price increase implemented in late August, restaurant sales still grew by 4%, suggesting that consumers are not reducing their spending significantly [6][7] Consumer Behavior - The company targets a higher income demographic, which has helped mitigate the impact of economic pressures on consumer spending [5] - There has been no observed change in consumer behavior regarding check sizes or spending patterns, indicating resilience among its customer base [4][7] - The company has maintained a conservative pricing strategy, averaging a 3.5% price increase for the year, aligning with typical inflation rates [8] Labor and Market Conditions - The company has successfully opened 21 new restaurants across 14 states without significant labor issues, indicating a stable staffing situation [10] - There has been no noticeable impact from broader economic challenges, such as layoffs or government shutdowns, on consumer behavior in the markets where the company operates [10][11]

Core Insights - Conagra Brands, Inc. (NYSE:CAG) is experiencing challenges due to commodity inflation, particularly in beef, leading to a downward revision of its FY2026 EPS from $1.82 to $1.79, reflecting a 22% year-over-year decline [1][2] - Evercore ISI has reiterated an In Line rating on Conagra while reducing the price target from $24 to $23, which represents a valuation of 12 times the projected 2027 EPS [1][3] Financial Performance - The FY2026 EPS revision indicates a significant decrease, with the new estimate at $1.79 compared to the previous $1.82 [1] - The price target reduction to $23 suggests a slight discount compared to Conagra's five-year average PE ratio of 13x, which has fluctuated between 10x and 16x [3] Market Position and Strategy - Conagra is navigating a year of change, facing rising expenses, potential tariffs, impacts from divesting brands, and investments in pricing and promotional strategies [2] - The company is expected to focus on regaining organic sales growth, particularly in the Frozen and Snacks segments, which account for approximately two-thirds of total sales [3] Company Overview - Conagra Brands operates in the packaged consumer products sector with four main segments: Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice [4]

Core Viewpoint - Argus downgraded J.M. Smucker from Buy to Hold due to ongoing struggles with volume growth and economic uncertainty impacting sales [1] Group 1: Financial Performance - J.M. Smucker is facing challenges with volume growth amid economic uncertainty, leading to price increases that are not sufficiently offsetting commodity inflation [1] - Rising green coffee prices and tariffs are exerting additional pressure on the company's margins [1] - Smucker shares are trading at 12 times projected FY27 EPS, which is lower than the peer average of 17, indicating a reasonable valuation under current inflationary conditions and weak coffee margins [3] Group 2: Strategic Initiatives - The divestiture of slower-growth pet food brands and the acquisition of Hostess Brands are seen as positive moves that could enhance cross-promotional efforts with Smucker's existing portfolio [2] - The company is expanding its Uncrustables brand into convenience stores as part of a revenue synergy strategy [2] Group 3: Future Outlook - Argus indicated that an upgrade could be considered if there are signs of sustainable margin and volume growth in the future [3]

Core Insights - Mondelez International (MDLZ) is facing significant challenges due to record cocoa inflation, impacting gross profit despite a 3.1% increase in organic revenues in Q1 2025 driven by strong pricing in its chocolate portfolio [1][8] - The company has implemented a multipronged mitigation strategy focusing on pricing, revenue growth management, and strategic pack architecture, which has shown minimal disruption and maintained consumer loyalty to core brands [2][5] - There are concerns regarding Mondelez's ability to sustain profitability amid prolonged commodity inflation, with a 3.5% decline in volume mix attributed to pricing elasticity and planned pack downsizing [3][4] Financial Performance - In Q1 2025, Mondelez reported a 3.1% organic revenue growth, primarily from pricing gains in its chocolate segment, but experienced a decline in gross profit and adjusted earnings per share due to soaring cocoa prices [1][8] - Operating income in developed markets, particularly North America, was negatively affected by cocoa cost pressures and soft consumer demand, while Europe saw pricing success but still faced operating income erosion [3][4] Future Outlook - Mondelez is positioned to manage cocoa volatility effectively, with strong pricing strategies, cost controls, and resilient brands supporting its margin strategy [5] - The company anticipates benefiting from improved leverage as cocoa markets stabilize, allowing for reinvestment in long-term growth [5] Stock Performance - Mondelez shares have increased by 13.4% over the past six months, outperforming the industry and broader Consumer Staples sector [6] - The stock is currently trading at a forward P/E ratio of 20.95, above the industry average of 15.72, indicating market expectations of business stability [13] Earnings Estimates - The Zacks Consensus Estimate for Mondelez's earnings has been revised upward, with current fiscal year estimates at $3.02 per share and next fiscal year at $3.33 per share, reflecting positive sentiment [16]

Financial Data and Key Metrics Changes - For the first quarter, the company generated over $1.4 billion in revenue, with a same-store sales increase of 3.5% and positive traffic growth [7][21] - Revenue growth was reported at 9.6%, driven by a 2.4% increase in average unit volume and 7.1% store week growth [21] - Diluted earnings per share increased by 1% to $1.7, while restaurant margin dollars increased by 4.7% to $239 million [21][22] Business Line Data and Key Metrics Changes - Weekly sales averaged $167,000 at Texas Roadhouse, $123,000 at Bubba's 33, and $71,000 at Jaggers, all showing positive same-store sales and traffic growth [15] - Average weekly sales for the first quarter were over $163,000, with To Go sales representing approximately 13.6% of total weekly sales [21] Market Data and Key Metrics Changes - The company opened eight company-owned restaurants in the first quarter, with plans to open approximately 30 company-owned restaurants this year [9][10] - Franchise openings are expected to include five international Texas Roadhouses and two domestic Jaggers [10] Company Strategy and Development Direction - The company aims to focus on delivering legendary food and service while navigating external economic factors [8] - Technology initiatives are progressing, with 65% of restaurants using a digital kitchen and 70% having upgraded guest management systems [11][12] - The company is committed to maintaining its pricing strategy, which is below inflation levels for both commodities and labor [32][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the current operating environment, citing strong demand for the brand and positive sales trends [8][15] - The company anticipates a full-year commodity inflation of approximately 4%, influenced by updated expectations for beef costs and tariffs [19][95] Other Important Information - The company celebrated the success of its operators at the annual Managing Partner Conference, emphasizing the importance of community engagement [26] - The company is focusing on improving the guest experience through new beverage menus tailored to regional preferences [12] Q&A Session Summary Question: Pricing strategy in relation to inflation - The company confirmed a 3.1% price increase in the first quarter, which is expected to drop to 2.3% in the following quarters, indicating pricing below inflation [32][34] Question: Labor leverage and hours - Labor hours grew at approximately 35% of comparable traffic growth, maintaining productivity despite challenges [40][41] Question: Restaurant margin performance - Management acknowledged a slight decline in restaurant profit dollars per week and emphasized the importance of monitoring this metric throughout the year [45][47] Question: To Go sales performance - The company noted improvements in To Go sales due to operational enhancements and better packaging, with margins being neutral to slightly positive [101][103] Question: Commodity inflation outlook - The company expects commodity inflation to remain under pressure, with specific guidance of approximately 4% for the full year [19][95] Question: Franchise acquisitions - The company maintains an active dialogue with franchisees regarding potential acquisitions but has no imminent plans beyond those already disclosed [140][142]