Zacks Investment Research upgraded shares of Red Robin Gourmet Burgers Inc. (RRGB) from UNDERPERFORM to NEUTRAL on November 21, 2014, with a target price of $70.00.
We upgrade our recommendation on Red Robin Gourmet to Neutral from Underperform owing to its robust third quarter results. Earnings of $0.50 per share beat the Zacks Consensus Estimate by 51.5% and increased 56.3% year over year owing to improved revenues. Though revenues of $267.4 million marginally missed the consensus mark, it grew 15.9% year over year owing to higher restaurant sales. The company has been posting positive comps over the past three years, in sharp contrast to its peers who have been struggling amid a sluggish economic environment. Overall, we are encouraged by the company's initiatives including menu innovation, effective marketing strategy, unit expansion and remodeling programs to reinvigorate its brands. However, we expect higher food costs and costs related to aggressive expansion strategies to dampen profitability, going forward. Moreover, weak consumer spending would also hurt traffic trends at its restaurants.
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