Raymond James cut its investment opinions on restaurant chains early Thursday, explaining that higher fuel prices following Hurricane Katrina could discourage people from going out to eat.
Analyst Bryan Elliott downgraded California Pizza Kitchen (CPKI) to outperform from strong buy; Darden Restaurants (DRI), Brinker International (EAT), IHOP (IHP), and RARE Hospitality International (RARE) to market perform from outperform; Outback Steakhouse (OSI), CBRL Group (CBRL), Cheesecake Factory (CAKE), Panera Bread (PNRA), and Steak n Shake (SNS) to underperform from market perform.
After Hurricane Katrina damaged oil refineries, more than 10% of U.S. refining capacity is offline and could remain that way for few weeks, Elliott said. He noted increased potential for gasoline shortages in areas such as Atlanta and Houston, which could increase the risk of a major change in consumer driving behavior. If this happens, spending on restaurants could be curtailed dramatically, Elliott said.