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Texas Roadhouse shares sink as analysts raise a red flag on margins

Tonya Garcia

Texas Roadhouse Inc. shares sank 8.2% in Tuesday premarket trading, setting up for the steepest percent decline since February 2017, after the restaurant chain missed on earnings and revenue in the first quarter. Chief Executive Scott Colosi said high labor costs were putting results under pressure. Analysts are also concerned about margins. "While an additional 1.5% menu price increase taken in early April should provide some relief in 2H... we now expect store margins to be down year-over-year in 2019," wrote Raymond James, which rates Texas Roadhouse shares market perform. Wedbush analysts cut the Texas Roadhouse price target to $56 from $62, writing that margin visibility "remains limited." They maintained the neutral stock rating. Stifel analysts also maintained their hold stock rating, but cut the price target to $60 from $70. Texas Roadhouse stock has gained 2.3% in 2019 so far while the S&P 500 index is up 17.4% for the period.