Krispy Kreme (DNUT) and Jack in the Box (JACK) outperformed most US restaurant peers in Q3, even as overall industry trends softened, Morgan Stanley said in a note Tuesday.

"Restaurants as a whole have performed poorly as industry data show a slowdown beginning in September," the firm said, adding that it views the weakness as cyclical rather than structural.

The brokerage said the S&P 500 outperformed its restaurant coverage universe in Q3, with food distributors the only segment posting a positive quarter. Within quick-service names, Krispy Kreme rose 33% and Jack in the Box gained 13%, while most other stocks declined. All casual dining names were negative for the quarter.

Looking ahead, Morgan Stanley said it expects misses to be common this quarter, though largely anticipated. It noted mixed sales and traffic data across channels, with fast casual and quick-service restaurants remaining soft while casual dining and food distributors have held up relatively better.

The brokerage said it does not expect a recession in 2026 but models a below-trend growth year for the US restaurant sector.

Morgan Stanley has an underweight rating and a $2.50 price target on Krispy Kreme and an equal-weight rating on Jack in the Box, with its price target cut to $20 from $23.

Krispy Kreme shares were up 3.2% and Jack in the Box added 4.3% in recent trading.

Price: 3.40, Change: +0.14, Percent Change: +4.14