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We expect the casual dining restaurant chain Red Robin Gourmet Burgers Inc. (RRGB - Analyst Report) to beat expectations when it reports fourth quarter and full year 2012 results on Feb 19.

Why a Likely Positive Surprise?

Our proven model shows that Red Robin is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: The Most Accurate estimate for Red Robin stands at 47 cents while the Zacks Consensus Estimate is pegged at 44 cents leading to an Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) of +6.82%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Red Robin currently retains a Zacks Rank #3 (Hold).  Note that stocks with Zacks Rank #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (Zacks Rank #4 and #5) should never be considered going into an earnings announcement.

The combination of the stock’s Zacks Rank #3 (Hold) and +6.82 % ESP makes us confident of a positive earnings beat this quarter.

What is Driving the Better Than Expected Earnings?

The rollout of the October menu, modest additional pricing and introduction of premium seasonal items are expected to drive sales this quarter. The comps in the fourth quarter of 2012 will also benefit from one extra operational week.

Investors should note that Red Robin expects to gain from the holiday week, which records about 40% higher sales than an average week. Higher revenues coupled with cost containment efforts and marketing expertise should also drive earnings growth in the quarter. The company’s earnings per share surpassed the Zacks Consensus Estimate in the trailing four quarters with an average surprise of 25.40%.

Other Stocks to Consider

Other than Red Robin, we also see likely earnings beats coming from three industry peers this earnings season.

Krispy Kreme Doughnuts Inc. (KKD - Snapshot Report): Earnings ESP of +9.09% and a Zacks Rank #2 (Buy).

Chuy's Holdings Inc. (CHUY - Snapshot Report): Earnings ESP of +7.14% and a Zacks Rank #2 (Buy).

AFC Enterprises Inc. : Earnings ESP of +6.45% and a Zacks Rank #2 (Buy).
 

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