4 Appetizing Restaurant Stocks - Investment Ideas

As written by Zacks on http://www.benzinga.com/207196/4-appetizing-restaurant-stocks-investment-ideas
At this time last year, consumers were hunkering down and tightening their belts. There were fewer people going out to eat, and restaurants suffered a great deal during that period.

But the economic downturn provided many restaurant operators the opportunity to re-work menus, reduce costs, and improve operations--all in an effort to get positioned to take advantage of the eventual recovery.

Well, the recovery is here. The economy has been in recovery mode since the second half of 2009, and it continues to gain strength. This positive economic backdrop is increasing consumer confidence, and consumers are more willing to spend a little more on lunch and dinner. This was the case in the fourth quarter of last year, when many casual dining restaurants began to experience a nice uptick in sales.

Even restaurant managers believe in the rebound. The National Restaurant Association recently said that "Restaurant operators are relatively optimistic about improving sales growth and economic conditions in the months ahead."

As the overall economy improves, consumer confidence will continue to rise and lead to additional visits to casual dining restaurants. That, combined with cost-cutting efforts made by the restaurant chains, puts these companies in a position to deliver robust earnings growth in the quarters ahead.

Here are four restaurant stocks that can deliver tasty menu items as well as gains:

Cheesecake Factory (CAKE)

The Cheesecake Factory operates upscale, casual, and full-service dining restaurants in the U.S. under The Cheesecake Factory, Grand Lux Café, and RockSugar Pan Asian Kitchen names.

In early February, Cheesecake Factory announced flat year-over-year sales. But its earnings per share of $0.28 surpassed consensus estimates by 4 cents, or 16.7%. That marked the fifth consecutive quarter that CAKE beat EPS estimates.

In the last 60 days, analysts have pushed their estimates higher. The 2010 Zacks Consensus Estimate increased 12 cents, or 10.6%, to $1.25, and the 2011 Zacks Consensus Estimate added 11 cents, or 8.4%, to $1.42.

This Zacks #1 Rank stock trades at 22x and 19x the Zacks Consensus Estimates for 2010 and 2011, respectively.

Cracker Barrel (CBRL)

Cracker Barrel owns and operates Cracker Barrel Old Country Store full-service restaurants and gift shops in the U.S.

In late February, the company reported fiscal second-quarter sales growth of 0.4% to $632.6 million, and earnings per share of $1.15. Its EPS easily topped the Zacks Consensus Estimate by 25 cents, or 27.8%. Cracker Barrel has beaten consensus estimates in the last five quarters by an average of 18.1%.

Management boosted its EPS guidance for fiscal year 2010 and now expects to earn $3.35 to $3.50 per share. Strong Q2 earnings and optimistic guidance prompted analysts to ratchet up their estimates for Cracker Barrel. In the last two months, the Zacks Consensus Estimate for 2010 has increased 26 cents, or 8.0%, and the 2011 Zacks Consensus Estimate is up 34 cents, or 9.6%.

CBRL is a Zacks #1 Rank stock, and it has a P/E multiple 12x fiscal 2011 EPS.

DineEquity (DIN)

DineEquity Inc. operates and franchises two full-service restaurant chains, Applebee's and International House of Pancakes (IHOP).

On March 3, DineEquity reported earnings per share of $0.76, soaring past the Zacks Consensus Estimate of $0.19. DineEquity has beaten the Zacks Consensus Estimate by an average of 223% for the last five quarters.

After the company reported strong fourth-quarter results, analysts began to substantially lift their earnings estimates. In the last month, the Zacks Consensus Estimate for 2010 is up 72 cents, or 36.2%, to $2.71. The 2011 Zacks Consensus Estimate has climbed $1.13, or 55.4%, to $3.17.

This Zacks #1 Rank stock trades at 14x 2010 consensus EPS estimates and 12x 2011 consensus EPS estimates.

Ruby Tuesday (RT)

Ruby Tuesday operates over 650 company-owned full-service casual dining restaurants under the Ruby Tuesday brand name. The company also has over 220 franchised Ruby Tuesday restaurants.

In January, the company reported a fiscal second-quarter sales decrease of 5.6%, due in large part to the closing of 43 restaurants, but Ruby Tuesday's EPS beat consensus estimates by 2 cents. In the last five quarters, the company has beaten the Zacks Consensus Estimate by an average of 93.6%.

In the last 30 days, the Zacks Consensus Estimate has climbed 5 cents, or 14.3%, to $0.63, while the 2011 Zacks Consensus Estimate is up 5 cents, or 6.9%, to $0.77.

This Zacks #2 Rank stock trades at 17x and 14x the Zacks Consensus Estimates for 2010 and 2011, respectively.

Ruby Tuesday will report third-quarter results on April 7 after the market close