-- Strong underlying trends across the US restaurant sector likely slowed toward the end of the first quarter, with an uncertain and a weak consumer environment expected to drive conservative guidance, UBS Securities said in a note on Monday.
"We expect (first-quarter) results to highlight generally solid underlying trends across much of the sector, but anticipate slower trends to exit the quarter and into (the second quarter so far)," UBS analyst Dennis Geiger said in the note.
Management commentary will be a key focus given the impact of holiday calendar shifts, tax rebates and elevated gas prices, Geiger said. Energy prices have spiked because of the US-Israel war with Iran that has disrupted shipments through the Strait of Hormuz, a critical shipping route.
"We anticipate still generally conservative (2026) guidance given above (average) uncertainty in the industry backdrop," Geiger wrote.
US consumer sentiment improved from an initial April estimate, but remained at a record low as near-term inflation expectations logged the biggest monthly increase in a year, final University of Michigan survey results showed Friday.
"Sentiment is unlikely to improve unless supply constraints are lifted or energy costs decline," according to the UBS note.
Retail sales at restaurants and bars almost stalled sequentially in March, government data showed last week.
Results across restaurants should largely be positive, especially when excluding the impacts of weather conditions, but "performance bifurcation among brands should remain reasonably wide again" during this reporting cycle, Geiger wrote.
Starbucks' (SBUX) investors expect the company to lift its US same store sales target for this year following a second-quarter beat, according to UBS. Wingstop (WING) is seen lowering its comparable sales outlook after reporting a bigger-than-expected decline in the first quarter.
The outlook for Cheesecake Factory (CAKE) and Chipotle Mexican Grill (CMG) will likely be maintained.
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