Overview
Truist has moved Texas Roadhouse to a Hold rating from Buy, pointing to sustained beef cost inflation through 2027 as a key constraint on the company’s margin expansion and near-term stock performance. The brokerage highlighted that stronger beef pricing - driven primarily by demand dynamics - will remain an important input shaping the outlook for the restaurant operator.
Cost outlook and demand drivers
Truist said higher beef prices are largely the result of robust demand and expects that inflation in beef costs will persist as consumption shifts toward higher-protein diets and continued product-quality improvements support ongoing buyer interest. The firm noted that Texas Roadhouse has historically shown an inverse relationship with beef prices, which increases the stock’s sensitivity to rising input costs.
Valuation and earnings revisions
The brokerage said Texas Roadhouse’s recent same-store sales strength is already reflected in the share price, leaving limited scope for further valuation gains in the near term. Truist lowered its price target to $188 from $206 and trimmed its 2027 earnings-per-share projection to $8.12 from $8.57, a level Truist says is roughly in line with consensus estimates.
Commodity inflation assumptions and margin impact
Truist now expects commodity inflation of about 7% in 2026 and forecasts 1.5% inflation in 2027, a change from its earlier view that inflation would decline. That adjustment prompted the firm to reduce its restaurant-level margin estimate for 2027 to 15.9% from 16.4%.
Pricing strategy and margin recovery
Historically, Texas Roadhouse has raised menu prices in line with long-term cost inflation, but the company has tended to be slower to pass through short-term spikes. Truist expects Texas Roadhouse to implement gradual menu-price increases as higher beef costs persist, including planned adjustments in 2026, which the brokerage says could support a recovery in margins over time.
Demand resilience versus limited near-term upside
Despite the downgrade, Truist continued to view Texas Roadhouse as well positioned from a demand standpoint. However, with the stock trading near historical valuation levels and not far from record highs, the brokerage sees limited upside until input-cost pressures ease or the shares experience a pullback.
Analyst perspective
From an equity-analyst standpoint, the firm’s actions reflect a reassessment of the company’s cost environment rather than a deterioration in demand fundamentals. The revision to commodity inflation assumptions and subsequent margin cuts drove the rating change, while management’s ability to execute gradual price increases will be an important factor in margin normalization.