Why Texas Roadhouse Stock Slipped Today

Key Points

• An analyst became notably less bullish on the restaurant operator.

• He no longer considers it to be a buy.

• 10 stocks we like better than Texas Roadhouse ›

On Thursday, investors clearly didn't have a good taste in their collective mouth for Texas Roadhouse (NASDAQ: TXRH). They traded out of the restaurant operator's equity, leaving it with a more than 1% decline on the day. And that was during a session when the S&P 500 index rose, albeit by a somewhat modest 0.8%.

Recommendation downgrade

At least some of the negative sentiment can be traced to an analyst recommendation downgrade, which occurred well before market open that day. Evercore ISI's David Palmer changed his view of Texas Roadhouse; he now feels it rates an in-line (hold, in other words), one full peg down from his previous outperform (buy). His current price target is $190 per share.

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In his latest analysis on the stock, according to reports, Palmer expressed more concern about external rather than internal factors. Specifically, he believes that the recent double-digit price rise for beef -- the company's critical input -- will persist into future quarters. In fact, to reflect this, the analyst lowered his annual earnings estimates for both 2025 and 2025 due to such anticipated inflation.

In detailing this, Palmer was a bit more positive about Texas Roadhouse's performance. He pointed out that in his estimation, the company is effectively sustaining good same-restaurant sales (an important metric in the industry) and foot traffic growth.

Not every pundit is a bear

The Evercore ISI prognosticator's move obliterated an earlier, more bullish take by one of Palmer's peers. After market close on Wednesday, Freedom Broker analyst Lynne Collier initiated coverage of Texas Roadhouse stock with a confident buy recommendation. She set her price target at $211 per share.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Texas Roadhouse. The Motley Fool has a disclosure policy.