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Shares in Restaurant Grou
p (RTN) are top of the this morning, up 9.5% for a bullish test of May highs and major moving averages. This means the shares have recovered nearly almost all of the ground lost since a mid-month sell-off began, kicked off by fresh uncertainty about US President Trump and global growth, and culminating this week with concerns about an overdue menu refresh.
Today’s driver is a 20-week trading statement that puts investors at ease regarding FY profits, management being able to reiterate guidance despite 2017 being a transitional year requiring investment and with a new chef at the helm. The welcome reiteration comes courtesy of higher passenger numbers benefiting Concessions, strong Cinema attendance assisting with Leisure’s turnaround and good weather helping Pubs.
Confidence at this early stage, despite growth for the Concessions and Leisure likely proving more moderate in the second half of the year, and more investment (price, marketing, new menus) required, suggests potential for an upside surprise come year end. Investors are clearly looking through a fall in Q1 sales and recent concerns, putting faith in the new CEO.
Bulls welcome the bounce from the floor of a 2.5-month falling channel. Bears note the shares still hampered by the ceiling of said channel (already well off today’s highs of +14%), and point to the long-term downtrend that began in late 2015 and failure to make higher highs since last August, leaving multiple hurdles along the way.
Mike van Dulken, Head of Research, 26 May 2017
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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