Chicago-based Morton’s Restaurant Group, Inc. (MRT) recently posted first quarter 2011 adjusted earnings of 16 cents, surpassing the Zacks Consensus Estimate of 13 cents and the year-ago quarter earnings of 11 cents per share. The earnings were driven by improvement in business travel resulting in five consecutive quarters of positive comps and margin expansion.

During the quarter, GAAP net income from continuing operation was $2.2 million or 12 cents per share compared with $1.2 million or 7 cents per share in the year-ago quarter.

Morton’s, one of the leading operators of steakhouses in the world, reported that total revenue in the quarter climbed 9.6% from the prior-year quarter to $82.5 million and was also ahead of the Zacks Consensus Estimate of $82 million. The upside in revenues was attributable to a comparable sales growth of 7.5% at Morton’s steakhouse restaurants.

During the quarter, operating margin expanded 150 basis points (bps) to 5.0%, aided by a 280-bp fall in restaurant operating expense, a 10-bp dip in depreciation and amortization expense and a 10-bp decline in marketing and promotional expense, partially offset by higher food and beverage costs (up 90 bps), pre-opening cost (up 20 bps) and general and administrative expense (up 50 bps).

During the quarter, the company opened a brand new steakhouse in uptown Dallas, Texas.


For the second quarter of 2011, management expects revenue in the range of $76 million to $78 million, same restaurant revenue to inch up 6% to 8% and earnings per share in the 3 cents to 5 cents range.

For fiscal 2011, the company anticipates revenue between $319 million and $323 million, comparable restaurant revenue to rise 6% to 8% and earnings per share between 45 cents and 49 cents.

Our Take

As the economy is showing signs of improvement, we believe Morton’s will be able to generate improved earnings. Morton’s has not only improved its comps but it has also been able to enhance margins despite cost inflation due to higher customer visits. The company is also making efforts to expand its business in both domestic and international markets. We expect estimates to go up in the coming days based on first quarter results and a positive outlook. The Zacks Consensus Estimates for 2011 and 2012 are pegged at 47 cents and 57 cents, respectively.

One of Morton’s primary competitors, BJ’s Restaurants, Inc. (BJRI) reported first quarter 2011 adjusted earnings of 25 cents per share, exceeding the Zacks Consensus Estimate of 19 cents driven by strong comparable restaurant sales growth.

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