Bull of the Day: Ruby Tuesday (RT)

Thanks to lower gas prices and a healing labor market, consumers are now much more willing to open their wallets for dining out. Improving restaurant industry trends and a turnaround in progress make this Zacks rank #1 (Strong Buy) restaurant chain stock worth a look.

About the Company
 
Headquartered in Maryville, Tennessee, Ruby Tuesday (RT - Snapshot Report) was founded in 1972.  At the end of last fiscal quarter, they had 658 company owned and 79 franchised Ruby Tuesday restaurants in 44 states, 13 foreign countries, and Guam. These casual-dining restaurants are concentrated primarily in the Southeast, Northeast, Mid-Atlantic, and Midwest US.
 
Improved Quarterly Results
 
The company reported its Q3 fiscal year 2015 results on April 9. Revenue for the quarter decreased 3.3% to $285.9 million, primarily driven by restaurant closings and the same-store sales decline. Loss for the quarter was $769,000 or $0.01 per share compared with a loss of $7.3 million or $0.12 per share in the same quarter of the prior year.   
 
Results were significantly better than the Zacks Consensus Estimate for a loss of $0.06 per share. Results reflected the improvement in the business model brought about mainly by the new turnaround effort implemented in late 2012.
 
These initiatives included repositioning the chain as a more energetic, broadly appealing, affordable, casual brand and introducing a broad range of new menu items.
 
Increasing Estimates
 
After better than expected results and updated guidance, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year are ($0.12) per share and $0.01 per share respectively, versus ($0.17) per share and ($0.07) per share, 30 days ago. Rising estimates sent the stock to a Zacks Rank # 1 (Strong Buy).
 
During the last four quarters, the company delivered an average positive earnings surprise of 24.63%, though they missed in two out of four quarters. This situation is likely to improve going forward.


The Bottom Line

The stock is not only witnessing a positive earnings momentum, it also has ‘A’ Ranks for both its Growth and Momentum style scores. Further, the industry is currently ranked 60 out of 265 Zacks industries (top 23%).

With healing labor market and declining oil prices, consumers are now much more willing to spend on high-quality casual dining. Thanks to favorable industry trends and several steps taken recently to improve its business model, the company is moving in the right direction

by Neena Mishra

Source:http://www.zacks.com/commentary/44437/bull-of-the-day-ruby-tuesday-rt 
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