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Casual dining chains were hammered during the recession by the worst industry conditions in over 30 years. Ruby Tuesday, Inc. (RT - Snapshot Report) has been clawing its way back by cutting costs and enhancing its brand. This Zacks #1 Rank (strong buy) is now expected to grow its earnings by the double digits in both fiscal 2011 and fiscal 2012.
Ruby Tuesday operates restaurants in 46 US states, DC, Guam and 15 other countries. It owns 676 Ruby Tuesday restaurants in the US and has 198 international and domestic locations operated by franchisees.
Ruby Tuesday Beat Again in the 2011 Fiscal Second Quarter
On Jan 5, Ruby Tuesday reported its 2011 fiscal second quarter results and surprised on the Zacks Consensus by 40%. The beat continued an impressive earnings surprise history. The company has now surprised 9 quarters in a row.
Earnings per share were 7 cents compared to the consensus of 5 cents. It made just 1 cent per share in the year ago quarter.
Same-restaurant sales jumped 4.2% at company-owned restaurants, its strongest quarterly sales in almost 5 years. Revenue climbed 6.2% compared to the fiscal second quarter of 2010.
Operating margin also expanded to 15.1% from 13.7% in the year ago quarter.
Continued Growth in Fiscal 2011
Under the management of its original founder and long-time CEO, Sandy Beall, the company is bullish about the rest of fiscal 2011.
It sees same-restaurant sales in the range of flat to up 2% for the year.
Operating margins are expected to be relatively flat due to a switch to higher-quality menu items and new product offerings.
Despite a surge in global food prices, as of January, the company expected its food costs to remain pretty stable compared to the prior year.
Zacks Consensus Estimates Rise
Analysts raised estimates in January, after the report, so the 2011 Zacks Consensus Estimate has been at 91 cents, up from 87 cents, for the past 60 days.
This is earnings growth of 24.2% compared to fiscal 2010. The company made just 73 cents in the last fiscal year.
The growth is expected to last into fiscal 2012 with earnings growth forecast at about 20%. The 2012 Zacks Consensus has risen 7 cents to $1.09 per month in the last 2 months.
Ruby Tuesday is scheduled to report fiscal third quarter results on Apr 6.
Just Barely a Value Stock
Ruby Tuesday has a forward P/E of 14.7, which allows it to just make the cut as a value stock. I consider a stock to be "value" if it trades under 15x forward estimates.
It does have a price-to-book ratio of just 1.5, which is well-within the value parameters of under 3.0.
The company also has a solid 1-year return on equity (ROE) of 10.2%.
Shares Have Trailed Since the Recession
Ruby Tuesday is one of the rare stocks that hasn't either regained, or come close to regaining, its pre-recession high.
As you can see in the 5-year chart, shares are up off the recession lows but not close to regaining their former high.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.