On Feb 18, 2013, we upgraded our recommendation to Outperform
Red Robin Gourmet Burgers, Inc.
), one of the most recognized full-service casual dining
restaurant chains in the United States. The upgrade was based on
the company's better-than-expected fourth-quarter 2012
Why the Upgrade?
On Feb 8, Red Robin reported its fourth-quarter 2012 adjusted
earnings of $0.59 per share, up 34.1% from the Zacks Consensus
Estimate. Results in the quarter benefited from higher revenue
growth and margin expansion.
Quarterly revenues increased 16.8% from the year-ago period to
$240.7 million, easily surpassing the Zacks Consensus Estimate of
$234 million. Over the past four quarters, Red Robin has
delivered an average surprise of 23.9%.
Following the release of fourth quarter results, the Zacks
Consensus Estimate for 2013 has gone up 5.8% to $2.18 per share.
Similarly, the Zacks Consensus Estimate for 2014 advanced 13.9%
to $2.48 per share. With the Zacks Consensus Estimates for both
the years moving north, Red Robin now has a Zacks Rank #1 (Strong
Reasons for Positive Bias
Apart from strong fourth-quarter results Red Robin's growth
story looks compelling. Red Robin's management team has
undertaken an operating initiative to significantly drive its
revenues by 2015. Moreover, Red Robin is focused on company-owned
unit expansion to augment its business further.
In order to reduce its costs, Red Robin is continuously trying
to enhance its technological infrastructure through several
initiatives, such as, improving supply chain, and minimizing
administrative headcount. Currently, more than 28% of Red Robin's
total restaurants are franchised which will provide another
engine for earnings per share growth.
Other Stocks to Consider
Besides Red Robin, other stocks in the restaurant industry
that are currently performing well include
Burger King Worldwide, Inc.
Jack in the Box Inc.
Cracker Barrel Old Country Store, Inc.
). All these companies carry a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
JACK IN THE BOX (JACK): Free Stock Analysis
RED ROBIN GOURM (RRGB): Free Stock Analysis
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