Investing.com -- Mizuho Securities expects Dutch Bros, BJ's Restaurants and Texas Roadhouse to deliver stronger sales growth than analysts anticipate as menu innovation, value-focused promotions and improving customer traffic support restaurant operators heading into the third-quarter earnings season.
The brokerage identified the three companies as its top picks ahead of a busy week of restaurant earnings, citing opportunities for stronger comparable-store sales and improved profit growth. However, it flagged continued uncertainty around consumer spending, inconsistent sales trends and cost pressures across the sector.
Dutch Bros remains Mizuho's top pick, with analysts expecting comparable-store sales growth of 6.3% in the third quarter, above the 6.0% consensus estimate. The coffee chain could benefit from food sales, increased mobile ordering and loyalty engagement, menu innovation and marketing investment. Mizuho expects stronger sales to support upward revisions to earnings estimates through 2027, although it lowered its price target to $65 from $80, citing lower valuations across peer companies.
The forecasts highlight a widening divide among restaurant operators as investors assess which chains can sustain traffic growth and protect margins in a challenging consumer environment. Mizuho favors companies with clearer sales-growth drivers, while remaining cautious about businesses facing inconsistent demand, turnaround risks or limited visibility into longer-term performance.
The earnings reports are scheduled for November 4 and 5. Dutch Bros, Cava Group, Dine Brands Global and McDonald's are due to report on November 4, while BJ's Restaurants, Shake Shack, Papa John's and Texas Roadhouse are scheduled to report on November 5.
BJ's Restaurants is also expected to outperform expectations, with Mizuho forecasting comparable-store sales growth of 5.5%, compared with the 4.8% consensus estimate. Seasonal Pizookies, its $13.99 Pizookie Meal Deal, weekday lunch promotions and menu improvements are expected to support customer traffic. The brokerage also anticipates better profit flow-through from sales growth than in the previous quarter and expects the momentum to continue into 2027. It maintained an Outperform rating and a $76 price target.
Texas Roadhouse could see its sales growth recover after a mid-October trough, according to Mizuho's checks. The brokerage attributed a 2%-3% slowdown in September comparable-store sales to backlash following allegations circulated on social media in August. It expects a gradual recovery through the fourth quarter as the company addresses the controversy through marketing and communications.
Mizuho maintained its third-quarter comparable-store sales growth estimate of 5.0% for Texas Roadhouse but forecast fourth-quarter growth of 3.5%, below the 4.5% consensus estimate. It expects the impact of the controversy to fade by year-end and projects comparable-store sales growth of 5.4% in 2027, above the 4.8% consensus. The brokerage raised its price target to $220 from $190, citing improving visibility into sales recovery and the potential for lower beef costs to support margins.
The outlook is more cautious for McDonald's, where persistent pressure on lower-income consumers, elevated gasoline prices and difficult comparisons could weigh on U.S. sales. Mizuho expects U.S. comparable-store sales to decline 0.5% in the third quarter and lowered its fourth-quarter estimate to flat growth from 1.0%. It cut its price target to $260 from $290 and maintained a Neutral rating.
Cava Group faces uncertainty over the durability of its sales growth beyond 2026, despite an expected recovery following the impact of a Cyclospora outbreak on customer traffic. Mizuho expects third-quarter comparable-store sales growth of 3.5%, slightly above the 3.4% consensus estimate, but lowered its price target to $56 from $70, citing lower valuations among growth-oriented restaurant peers.
Papa John's outlook remains pressured by weak comparable-store sales, restructuring costs and uncertainty surrounding its turnaround. Mizuho expects North American franchised comparable-store sales to fall 8.0% in the third quarter, compared with the 7.7% decline expected by analysts. It lowered its price target to $20 from $26 and maintained a Neutral rating.
Shake Shack, meanwhile, is expected to benefit from menu innovation and promotional activity, particularly in the fourth quarter. Mizuho forecasts third-quarter comparable-store sales growth of 1.2%, below the 1.5% consensus estimate, but expects fourth-quarter growth of 2.0%, above the 1.4% consensus. It maintained an Outperform rating while lowering its price target to $80 from $90.
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