Red Robin Gourmet Burgers - Momentum
April 08 2012 - 8:00PM
Zacks
RRGB 040612
Red Robin Gourmet Burgers
(RRGB)
I have dined at a
couple Red Robins in my day and had no idea they were a public
company until about a week ago. You’d think after ranking as
the #1 Best Burger (chain stores) 3 years in a row from Zagat; they
would be on my radar being that I’m a connoisseur of fine ground
beef in a bun and a stock junkie.
After listening to
their commercial about 20 times I had their chime in my head, but
it was a random trip out to Garland Texas that introduced me to one
of the 462 restaurants in the chain. It was worth the trip if
you like burgers and other items.
On the surface, my
biggest complaint would be obviously be visibility, unlike
competitors like Chipotle Mexican grill, which seems to be
everywhere you look (physically and in financial circles), Red
Robin is a bit harder to find. Red Robin does have diversity
in its offerings with everything from ribs to shrimp tacos to fish
and chips, which add to its attraction.
When you compare
the two, Chipotle (CMG) is currently trading at more than 50 times
forward earnings, while Red Robin is at about 19 times.
Perhaps there is still some value in this unique burger
chain.
Company Description &
Developments
Red Robin currently operates more than 460 restaurants across the
United States and Canada. The company is also expanding through its
franchise strategy. Currently, the restaurant chain is 70% company
operated and 30% franchised.
The company expects to roll out 13 to 15 restaurants in 2012,
including both full-sized restaurants and smaller prototype units.
Small-size restaurants will likely drive growth in non-traditional
locations and also improve return on invested capital. Red Robin’s
units are mostly located in California, Colorado, North Carolina,
Ohio, Virginia, and Washington. The company expects to open around
50% of its targeted restaurants in 2012 in these states. While the
company seems comfortable expanding in familiar ground, we also
foresee management expanding in relatively new markets to avoid
market saturation.
Red Robin targets new unit investment/development to be in the
range of $50–$60 million in 2012t. It also plans to increase
investments in equipment and store remodeling.
Financial Profile
RRGB is a small-cap (526 million) company that is trading at about
19 times forward (expectations for next quarter) earnings.
RRGB recently became a Zacks Rank 1 strong buy on April 4th.
Total 2011 sales
increased 7% compared to full year 2010; earnings increased from
$0.46 in FY2010 to $1.34 in FY2011, over 290%! They are
expected to earn $1.54 for the full year (FY2012) according to the
Zacks Consensus Estimate.
Earnings Estimates
Of the 9 analysts who cover Red Robin, the consensus is for the
company to grow earnings by 21.4% in the current year (FY2012) and
roughly 16.5% in FY2013. RRGB has blown away analysts’
expectations to the upside 4 quarters in a row; their average
surprise was a positive 54.38% over the last year.
In terms of the magnitude of analyst estimate trends, we are
seeing all of the consensus estimates higher than they were9 days
ago for the current and next quarter as well as FY2012 and
FY2013. RRGB is expected to earn 67 cents when they report on
May 17th.
Market Performance & Technicals
Red Robin’s stock price has been in a clean, strong bullish channel
since October of 2011. In that time shares have gained 81%,
hitting a high of about $38. Recently shares have pulled back
slightly, but still remain in an overall bullish trend.
Support comes
around the $35 level, then below that more support will come at the
50 day moving average of $34.68. The 200 day moving average
stands quite a bit lower at $30.70, which also can be seen as
support and a key level in the current trend.
Use caution with
RRGB as volume is on the low side, trading an average of about
200,000 shares daily.
RRGB has
outperformed the S&P 500’s performance over the past year by
more than 25%. It outpaced it by over 14% in the past 3
months, but has become more correlated in the last month only ahead
of the index by 1.5%.
While the
prospects and performance may be good for this stock, the low
volume and sensitivity to consumer trends could make it a bit more
volatile.
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is
also the Editor in charge of the market-beating Zacks Whisper
Trader Service.
CHIPOTLE MEXICN (CMG): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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