03:59 PM EDT, 07/15/2026 (MT Newswires) -- 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 (second) quarters, though bars are higher today," according to the note.

The firm sees another "tougher" quarter for franchised fast food companies, with certain exceptions, it said. McDonald's (MCD) and Domino's Pizza (DPZ) are among the names that likely face tougher near-term setups. Beverage continues to be a "bright spot," with Morgan Stanley remaining overweight on Starbucks ( SBUX ) and Dutch Bros' ( BROS ) stocks, according to the note.

The firm upgraded its rating on Cava Group's ( CAVA ) shares to overweight from equal weight while downgrading both Chefs' Warehouse ( CHEF ) and Black Rock Coffee Bar ( BRCB ) to equal weight from overweight.

Cava ( CAVA ) is among the few companies that Morgan Stanley said it feels "good about most" regarding several key growth metrics, including traffic and unit expansion. "Valuation is defensible, because it remains one of the strongest fundamental stories in restaurants," the brokerage wrote.

Although Chefs' Warehouse ( CHEF ) remains fundamentally strong with a high likelihood of beating its financial guidance, a nearly 60% year-to-date rally has pushed the stock to the high end of its typical valuation range, Morgan Stanley said.

"Looking at the numbers, there remains a disconnect between (Black Rock Coffee Bar's ( BRCB )) growth profile and valuation, but we're aware that narrative, execution, and qualitative concerns can sometimes override that," the brokerage wrote. "For a newly public young company in a large competitive category, hitting guidance isn't enough."

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