Bank of America has pinpointed two restaurant companies it considers noteworthy following first-quarter reports, highlighting distinct operational and financial developments that shaped the firm's outlooks and model updates.
First Watch Restaurant Group
Bank of America retained a Buy rating on First Watch Restaurant Group with a $19 price objective, citing improving underlying momentum as recent strategic adjustments begin to take effect. The company delivered first quarter same-store sales growth that outpaced expectations, an outcome the analysts linked to initiatives such as core menu changes and expanded digital marketing efforts.
Analysts noted a 100-basis-point headwind from adverse weather and, when adjusting for that impact, traffic growth accelerated on both one-year and two-year bases. Bank of America said it expects that traffic trend to continue even as the company faces more difficult year-over-year comparisons ahead.
On the profitability side, Bank of America pointed to operational efficiency gains that should support margins, specifically citing more consistent labor management and increasing sales leverage as contributors to potential margin improvement.
The firm made a modest revision to its fiscal 2026 adjusted EBITDA estimate for First Watch, trimming it to $138.3 million from $139.7 million. That reduction was attributed primarily to the timing of store openings. At the same time, Bank of America raised its same-store sales estimate for fiscal 2026 to 3.0 percent from 2.3 percent based on a better-than-expected sales mix. The analysts indicated they view the company’s long-term targets as achievable under the current trajectory.
In its first quarter of fiscal 2026, First Watch Restaurant Group Inc. reported net revenue of $331 million, which exceeded forecasts, while the company recorded a net loss per share of $0.04, wider than analysts had anticipated.
Portillo's
Bank of America kept a Neutral rating on Portillo's and lowered its price objective to $6 from $7, reflecting a reduction in the firm’s assumed net restaurant growth. Portillo's also produced a same-store sales result that beat expectations for the quarter, prompting the firm to lift its fiscal 2026 same-store sales projection to positive 1.0 percent from positive 0.1 percent.
The firm increased its revenue estimate for Portillo's to $785.5 million from $778.3 million and raised adjusted EBITDA expectations to $96.7 million from $94.1 million, driven by stronger revenue and restaurant-level margins. Bank of America noted restaurant-level margins of 21.4 percent for the period, above the company's guidance range of 20.5 to 21.0 percent.
However, the analyst team now assumes Portillo's will expand its store base at a 7 percent annual rate, down from a prior assumption of 10 percent, reflecting the view that the slower growth rate observed in 2027 is likely to persist.
For the first quarter of 2026, Portillo's Inc. reported earnings per share of -$0.01 and revenue of $182.6 million, with both figures described as coming in just below analyst forecasts.
Takeaway
Bank of America’s analysis underscores two distinct trajectories within the restaurant sector: First Watch is viewed as a name with momentum and margin recovery potential that supports a Buy rating, while Portillo's receives a more cautious Neutral stance driven by tempered unit growth assumptions even as near-term sales and margin metrics improved.