Restaurant Stocks

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Casual dining stocks rise following upgrade of Ruby Tuesday




NEW YORK (Thomson Financial) - Shares of casual dining restaurants rose
Wednesday after an analyst upgrade of Ruby Tuesday Inc. lifted sentiment.
Ruby Tuesday rallied as much as 9% to $8.56 in recent trading after hitting
a high of $8.63, the highest level since Jan. 7.
SunTrust Robinson Humphrey upgraded Ruby Tuesday to buy from neutral, citing
the stock's recent underperformance.
"We recommend investors reconsider Ruby Tuesday, as its shares have traded
off as a result of declining earnings and a high level of debt," analyst
Christopher O'Cull wrote to clients.
O'Cull said during the past 12 months, declining same-restaurant sales have
resulted in a precipitous fall in margin and rising leverage ratios. While some
may view this performance as warranting a below-average price-to-earnings
multiple, "we believe the company has the potential to create positive returns
for income-oriented investors given its significant free cash flow potential."
Other casual dining stocks also traded higher, with shares of Darden
Restaurants Inc. up 4% at $36.74 and Cheesecake Factory Inc. 3.1% higher at
$22.38.
Elsewhere, shares of Texas Roadhouse Inc. rose 1.5% to $11.89 and California
Pizza Kitchen Inc. added 2.2% to $15.59.

Wanfeng Zhou
wz/pc

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