RRGB: Soaring food prices cause Red Robin to miss earnings expectations

Red Robin Gourmet Burgers (RRGB), Greenwood Village, CO,  reported that soaring food costs caused it to miss securities analysts’ earnings forecasts, which usuallly are based on guidance from the companies they cover. In the first quarter, the restaurant chain reported earnings of 43 cents per share compared with analysts’ average estimate of 50 cents. Reuters’ summary page for RRGB is here.

In response to the earnings miss, RRGB is off 4.29% to $37.03 at the moment.

Notable Calls predicts the miss will cause the stock to drop this morning. Noting that two sell side brokerage firms have a $46 target price for the stock, Notable Calls, which is written by a portfolio manager, says look at buying the stock below $35. The writer of Notable Calls is anonymous because he/she is some kind of trader or money manager and reports on notes that brokers distribute to major institutional clients but not to the public. After reading the blog for awhile, I decided it’s credible and put it on my blog roll.

In its news release, RRGB said that despite the earnings miss, it raised its earnings guidance, or forecast, for all of fiscal 2008. This is one reason some analysts are still bullish on the company.

The questions, of course, are:

1. Will food prices continue to soar?
2. Will consumers cut back on patronising casual dining restaurants like Red Robin Gourmet in the face of soaring gasoline and food prices?
3. Can RRGB raise prices fast enough to keep ahead of rising food costs?
4. Is it smart to buy a stock that has missed on its earnings estimates?

Each investor will have to answer those questions and decide whether RRGB is a good investment at this time.

A transcript of Red Robin’s conference call with analysts is here.

Red Robin Gourmet is the 21st largest company based in Colorado.

Charts for RRGB and some of its close competitors are here. Their point and figure charts with their price objectives, which are guides, not predictions, are here.

Full disclosure: I don’t own any of these stocks.

For educational purposes only. Investigate stocks on Reuters.com, Yahoo.com and Google.com. Also, search the web for information. And read your local papers, which cover companies based in your state and area as well as anyone. That gives local investors an edge, if they know what to look for.

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