Overview
Stephens on Thursday increased its price objective for Texas Roadhouse to $180, up from $168, while maintaining an Equal Weight rating on the shares. The move reflects the broker's updated view on margin dynamics even as it remains cautious on the stock near current levels.
Quarterly performance and margin pressure
Topping the firm's assessment were the company's fourth-quarter 2025 results, which fell short of Street expectations. The top-line shortfall was described as modest, but restaurant-level profitability missed the firm's modeled assumptions. Elevated food inflation was identified as the primary headwind limiting flow-through and compressing both EBITDA and earnings per share. The company reported a gross profit margin of 17.79% for the period, a metric the analyst note singled out as indicative of ongoing cost pressures.
Additional data shows eight analysts have revised earnings estimates downward for the upcoming period, underscoring the broader market reaction to the margin headwinds.
Traffic and guest engagement
Despite the margin drag, guest engagement metrics provide a brighter signal. Trends reportedly improved as the quarter concluded, with January described as strong by the company. Those improvements underpin Stephens' view that Texas Roadhouse maintains traffic leadership even in a pressured consumer environment.
Forward-looking views from Stephens
Stephens characterizes Texas Roadhouse as a best-in-class operator that is well positioned to continue capturing share through 2026. However, the firm believes that buy-side models have already baked in much of the anticipated share gains and that gross margin upside is more appropriately reflected in 2027 than in the near term.
According to Stephens, the most significant potential catalyst for a meaningful move higher in the stock would be easing beef costs in the second half of 2026. Absent that input cost relief - or a compelling valuation reset - the firm remains on the sidelines. That said, Stephens indicated it would become constructive if the shares experienced a pullback.
Valuation and market context
The stock was trading at $182.53, carrying a price-to-earnings ratio of 28.3. The firm’s analysis suggests the shares remain undervalued relative to its Fair Value framework, even with the near-term margin pressures. Investors can access comprehensive Pro Research Reports covering TXRH and more than 1,400 other U.S. equities for additional detail on company-level modeling and assumptions.
Other broker and corporate developments
In related coverage moves, TD Cowen initiated on Texas Roadhouse with a Buy rating and set a price target of $215.00, citing the chain’s history of outperformance on same-store sales. TD Cowen also began coverage of Brinker International with a Buy rating and a $192.00 target, noting expectations for above-consensus same-store sales and improved consumer perceptions.
Separately, Bank of America downgraded Ciena to Neutral and removed its price target. The decision cited concerns over valuation and the company’s business outlook, including the potential for peak margins and slower order and backlog trends. Bank of America also highlighted what it views as limited pure-play optionality on AI deployments as a factor in its reassessment.
Corporate governance news at Texas Roadhouse included an SEC filing detailing new executive compensation packages for fiscal 2026, with base salaries disclosed for senior leadership roles.
Takeaway
Stephens’ upgrade of its price target reflects a view that margins should improve over a multi-period horizon, but the firm’s Equal Weight rating and comments about embedded buy-side expectations signal caution. The interaction between food cost inflation and traffic leadership will determine near-term earnings momentum, while beef-cost normalization in the back half of 2026 is identified as the clearest catalyst for a more meaningful re-rating.