Restaurants, Food Distributors Poised for Mixed Second Quarter, Morgan Stanley Says

US restaurant and food distribution companies likely saw a mixed second quarter, with largely stable industry trends that are masking "signs of strain," Morgan Stanley said in a note e-mailed Wednesday. The stable outlook is supported by Black Box data showing steady same-store sales growth through the June quarter, according to the brokerage. However, there are certain "signs of strain," the firm said in a note to clients. The sectors are facing slowing retail sales and other headwinds. A possible summer cyclosporiasis outbreak could temporarily impact the lettuce supply and deter diners, Morgan Stanley said. "We don't see a big change in underlying macro themes near term that could help change the fortunes of some of the more challenged brands," the brokerage wrote. "Larger (quick-service restaurant) we think remains a soft spot; beverage quite strong; fast-casual mixed, but maybe better at the margin; full-service also mixed, but good in absolute; and food (distribution) resilient overall." Morgan Stanley sees Performance Food Group (PFGC) as a preferred name among food distributors. All companies in the brokerage's coverage in this category are likely to have "solid.