The recent slump has created more reasonable valuations for some companies, given the industry's strong fundamentals, which include solid same-store sales growth, well-controlled labor and food costs, and strong balance sheets.
Based on their current valuations, we're upgrading Yum! Brands (YUM
), the name behind KFC, Pizza Hut, and Taco Bell; and CBRL Group (CBRL
), which operates Cracker Barrel restaurants, to 4 STARS (accumulate) from 3 STARS (hold). We have also raised our opinion on coffee chain Starbucks (SBUX
) to 3 STARS from 2 STARS (avoid). Analyst Milton covers restaurant stocks for Standard & Poor's