Ruby Tuesday, Inc (RT) recently posted its ninth consecutive earnings surprise. Estimates are on the rise and are projecting solid growth for the next 2 years.
This Zacks #1 Rank (Strong Buy) also got a boost from a deal with a customer-focus consulting company to align its decisions with its customers needs.
Company Description
Ruby Tuesday, Inc. owns 676 Ruby Tuesday restaurants and has almost 200 franchise locations. The company’s footprint covers 46 stats and 15 countries.
Sales, Earnings Jump
On Jan 5 Ruby Tuesday announced a 4.2% increase in same-restaurant sales for the second quarter of fiscal 2011. Additionally, the company managed to widen its restaurant-level operating margin 140 bps, to 15.1%, despite rising commodity prices.
Net income jumped more than 10 times, to $4.6 million, from $0.4 million. Earnings per share came in at 7 cents, up from just a penny a year ago. Analysts were expecting 5 cents, giving Ruby Tuesday its ninth consecutive earnings surprise.
Estimates Improve
Ruby Tuesday analysts were raising estimates even before the quarterly report and continued to do so after the news. The Zacks Consensus Estimate for full-year fiscal 2011 is up a nickel to 91 cents.
Next year’s forecasts rose 6 cents, to $1.08. Given the 73 cents the company earned last year, the expected growth rates are now 25% and 19%.
Good Industry & Value
Retail restaurants are currently ranted 65th out of 264 industries on Zacks.com. Of the 42 companies in that space, Ruby Tuesday comes in at fourth.
RT’s PEG ratio is coming in at 1.48, which is about in line with its peers. However, the price to sales of 0.79 is better than the average. The P/Es are not too bad either. Shares are trading at 16 times this year’s estimates and less than 14 times next year’s projections.
Customer Insights
On Jan 6 Ruby Tuesday said it entered into a 3-year deal with dunnhumbyUSA, a customer-focused consulting company. The partnership will allow Ruby Tuesday to align its decisions with customer demands.
The Chart
Shares of RT jumped on both the earnings surprise and the announcement of the dunnhumbyUSA agreement. Investors really like the direction Ruby Tuesday is heading and it could emerge from the beaten up casual dining segment even strong than before.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
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