While not a crowded field, there is certainly competition. P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) owns and operates 168 Pei Wei stores in the same space and another 200 or so of its namesake stores. Privately-held Panda Restaurant Group, Inc. operates more than 1,300 mall-based Panda Express stores and Carlson Restaurants Worldwide, Inc., another privately-held firm, operates more than 90 Pick Up Stix stores in the US southwest.

Chipotle shares have gained more than 80% in the past 12 months, while P.F. Chang’s shares have fallen by around -40%. The pricier Chang’s has stalled as customers have voted with their feet, staying away from higher priced casual dining in favor of lower cost stores like Chipotle.

But even low-priced stores are having their troubles. McDonald’s Corp. (NYSE: MCD), which had been growing nicely for several quarters, had a downturn in its August sales. That is not a positive signal for a new lower-priced option like Chipotle’s new ShopHouse brand, and Chipotle originally came from McDonald’s.

And brand is another problem. Building a solid new brand is not easy or cheap in the best economic times — and the US economy is not anywhere near its best right now. Chipotle also faces the problem of essentially being unable to leverage its solid position in Mexican food eateries in a completely different style of cooking. The situation resembles what you might think if your favorite local Mexican restaurant suddenly began serving Thai food. The usual reaction is to ask what the heck the store knows about making Thai food. To avoid that reaction costs a lot and if Chipotle puts enough money behind the ShopHouse stores, the company might come up with a winner.

Chipotle’s revenue grew 22% in its most recent quarter. If the company can keep that up, there’s no reason to think that the ShopHouse stores won’t be successful. But that’s a pretty big ‘if’ as the economic data keeps slowing.

Shares in Chipotle are up about 0.5% today, at $317.40, in a 52-week range of $164.26-$337.32. P.F. Chang’s shares are up more than 1%, at $29.16, in a 52-week range of $27.50-$53.39.

Paul Ausick

Allscripts Healthcare Solutions, Inc. (NASDAQ: MDRX) Raised to Buy at Auriga.
AMR Corporation (NYSE: AMR) Cut to Neutral at JPMorgan.
Analog Devices Inc. (NYSE: ADI) Cut to Neutral at Stern Agee.
BHP Billiton Ltd. (NYSE: BHP) Cut to Neutral at Credit Suisse.
Boyd Gaming Corp. (NYSE: BYD) Cut to Underperform at BofA/ML.
Choice Hotels (NYSE: CHH) Raised to Neutral at Credit Suisse.
KiOR, Inc. (NASDAQ: KIOR) Started as Outperform at Credit Suisse.
Leap Wireless International Inc. (NASDAQ: LEAP) Cut to Neutral at Baird.
Marathon Oil Corporation (NYSE: MRO) Cut to Neutral at Credit Suisse.
Marriott International, Inc. (NYSE: MAR) Cut to Neutral at BofA/ML.
MetroPCS Communications, Inc. (NYSE: PCS) Cut to Neutral at Baird; Maintained Neutral but cut target to $12 at Credit Suisse; Maintained Buy with $22 target at Argus.
Overseas Shipholding Group Inc. (NYSE: OSG) Cut to Sell at Deutsche Bank; Cut to Hold at Jefferies.
P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) Cut to Sell at Argus.
Rowan Companies (NYSE: RDC) Raised to Neutral at Credit Suisse.
Skilled Healthcare Group, Inc. (NYSE: SKH) Started as Underperform at BofA/ML.
Texas Instruments Inc. (NYSE: TXN) Cut to Neutral at Stern Agee.
Valero Energy Corporation (NYSE: VLO) Reiterated Buy with $35 target at Argus.
Yandex N. V. (NASDAQ: YNDX) Started as Overweight at JPMorgan.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Cisco Systems, Inc. (NASDAQ: CSCO) is down 2.75% premarket to $15.84, relative to a 52-week range of $14.78-$26.00.

Illumina, Inc. (NASDAQ: ILMN) is down nearly 10% premarket to $62.80, relative to a 52-week range of $41.15-$79.40.

Level 3 Communications (NASDAQ: LVLT) is down more than 3% before market open to $2.15, relative to a 52-week range of $0.83-$2.67.

P.F. Chang’s China Bistro (NASDAQ: PFCB) is down more than 11% premarket to $34.80, relative to a 52-week range of $37.38-$53.39.

Baker Hughes Inc. (NYSE: BHI) Reiterated Hold at Argus.
Biogen Idec Inc. (NASDAQ: BIIB) Raised to Buy at ISI Group.
Brocade Communications Systems, Inc. (NASDAQ: BRCD) Maintained Buy with $7.50 target at Canaccord Genuity.
Capital One Financial Corporation (NYSE: COF) Reiterated Sell at Argus.
Celestica Inc. (NYSE: CLS) Maintained Buy but cut target to $11 at Argus.
Cimarex Energy Co. (NYSE: XEC) Started as Buy at Canaccord Genuity.
CONSOL Energy Inc. (NYSE: CNX) Raised to Neutral at Goldman Sachs.
Ferrellgas Partners (NYSE: FGP) Maintained Underperform as Bear of the Day at Zacks.
The Fresh Market, Inc. (NASDAQ: TFM) Raised to Overweight at JPMorgan.
Intel Corporation (NASDAQ: INTC) Maintained Buy with $28 target at Gleacher.
Jiayuan.com International Ltd. (NASDAQ: DATE) Started as Outperform at Oppenheimer.
Kosmos Energy Ltd. (NYSE: KOS) Started as Outperform at Credit Suisse.
McKesson Corporation (NYSE: MCK) Raised to Outperform as Bull of the Day at Zacks.
Molycorp, Inc. (NYSE: MCP) Raised to Overweight at Piper Jaffray.
Patriot Coal Corporation (NYSE: PCX) Raised to Conviction Buy List at Goldman Sachs.
Patterson-UTI Energy Inc. (NASDAQ: PTEN) Covered as Value Stock at Zacks.
Peabody Energy Corporation (NYSE: BTU) Raised to Buy at Goldman Sachs.
P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) Cut to Equal-weight at Morgan Stanley.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

It is widely believed that McDonald’s Corporation (NYSE: MCD) is the king of the food sector when it comes to being defensive because of its product mix and because of its high dividend.  There are actually many other restaurant chains, some fast food and some casual dining to upscale dining, that offer close to the same sort of dividend for investors.

Our dividend screen identified the shares of six companies.  Among these companies, the highest dividend is almost 3.5%.  The lowest yielding restaurant company pays a dividend exceeding 1.8%.  Returns of equity (ROE) range from an attractive 16.7% to an eye-catching high exceeding 83%.  Except where otherwise noted, the source for all performance and financial data is Finviz.com.

Listed in alphabetical order of their ticker symbols the six restaurant chains are: Darden Restaurants, Inc. (NYSE: DRI), Brinker International Inc. (NYSE: EAT), McDonald’s Corp. (NYSE: MCD), P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB), Yum! Brands, Inc. (NYSE: YUM), and Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL).

Darden Restaurants, Inc. (NYSE: DRI) pays a 2.7% dividend with an earnings to dividend payout ratio of 36.7%. The company’s return of equity (ROE) is an attractive 24%. Its forward PE of 12.3 is the lowest among these six restaurant chains.  In Thursday trading, Darden’s shares closed at $46.86, down 0.32%.  Its 52-week price range is $36.27 to $52.12.   Red Lobster and Olive Garden are two of the brands here that have helped lead the charge.

Brinker International Inc.  (NYSE: EAT) pays a 2.4% dividend with an earnings payout ratio of 35.1%.  Its forward PE is 13.1 and its ROE is nearly 25%.   Brinker International shares closed at $23.20 on Thursday, down 0.56%. Its 52-week range is $13.69 to $25.96. Having Chili’s and Maggiano’s pays off and there appears to be enough earnings power here for that dividend to go higher.

Apple Inc. (NASDAQ: AAPL) Reiterated Buy with $415 target at Argus; Reiterated Buy and raised target to $485 at Canaccord Genuity.
Atmel Corporation (NASDAQ: ATML) Reiterated Buy with $17 target at Gleacher & Co.
Citrix Systems, Inc. (NASDAQ: CTXS) Cut to Underweight at JPMorgan after being raised to Outperform as Bull of the Day on Monday by Zacks.
Cummins Inc. (NYSE: CMI) Maintained Outperform as Bull of the Day at Zacks.
Enzon Pharmaceuticals Inc. (NASDAQ: ENZN) Cut to Underperform as Bear of the Day at Zacks.
The Home Depot, Inc. (NYSE: HD) Started as Overweight at Barclays.
HSBC Holdings (NYSE: HBC) Cut to Neutral at Credit Suisse.
P.F. Chang’s China Bistro (NASDAQ: PFCB) Raised to Neutral at Credit Suisse.
ProLogis (NYSE: PLD) Raised to Buy at BofA/ML.
RadioShack Corp. (NYSE: RSH) Started as Underweight at Barclays.
Reliance Steel & Aluminum Company (NYSE: RS) Maintained Strong Buy as Value at Zacks.
Research In Motion Limited (NASDAQ: RIMM) Cut to Market Perform at Morgan Keegan.
Southern Copper Corp. (NYSE: SCCO) Cut to Hold at Citi.
Sprint Nextel Corp. (NYSE: S) Cut to Sell at Stifel Nicolaus.
Texas Instruments Inc. (NYSE: TXN) Reiterated Buy with $43 target at Gleacher & Co.
Xilinx Inc. (NASDAQ: XLNX) Raised to Neutral at Goldman Sachs.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Anheuser-Busch InBev (NYSE: BUD) Cut to Neutral at BofA/ML.
Atmel Corporation (NASDAQ: ATML) Reiterated Buy and raised target to $17 at Gleacher & Co.
Dow Chemical Co. (NYSE: DOW) Raised to Buy with $49 target at Argus.
Eastman Chemical Co. (NYSE: EMN) Maintained Outperform as Bull of the Day at Zacks.
Hess Corp. (NYSE: HES) Raised to Buy at Argus.
Intel Corporation (NASDAQ: INTC) Reiterated Outperform with $28 target on Focus List at Credit Suisse.
JA Solar Holdings Co., Ltd. (NASDAQ: JASO) Cut to Sell at S&P Equity Research (late Wednesday call).
Lithia Motors, Inc. (NYSE: LAD) Maintained Buy as Value stock at Zacks.
McDonald’s Corporation (NYSE: MCD) Cut to Neutral at Piper Jaffray.
Micron Technology Inc. (NASDAQ: MU) Started as Neutral at JPMorgan.
OpenTable, Inc. (NASDAQ: OPEN) Raised to Buy at BofA/ML.
PMI Group, Inc. (NYSE: PMI) Called as Bear of the Day with $1.75 target at Zacks.
P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) Cut to Neutral at Piper Jaffray.
Time Warner. Inc (NYSE: TWX) Reiterated Outperform with $40 target on Focus List at Credit Suisse.
Trimble Navigation Limited (NASDAQ: TRMB) Raised to Overweight at JPMorgan.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

McCormick & Schmick’s Seafood Restaurants, Inc. (NASDAQ: MSSR) is currently the most recent of the upscale dining chains that has an offer to go private.  The offer comes from Landry’s via Fertitta for $9.25 per share and the stock is trading higher than the proposed offer.  The 52-week trading range is $6.14 to $11.98, so the thought is that shareholders will demand a higher price.  At $9.45, this company’s market cap is only $140 million against 2010 sales of $351 million.  As a reminder, this was a $20.00 to $25.00 stock back in 2006 to 2007.

It was less than a month ago that Morton’s Restaurant Group, Inc. (NYSE: MRT) announced a strategic alternatives exploration which could involve a sale.  By the way, ‘strategic alternatives’ almost always translates to “looking for a buyer.”  This stock is at $7.50 today and it traded from $6.44 up to $7.20 when it made this announcement.  The upscale steakhouse has a current value of $120 million against $296 million in 2010 sales.

But what about other chain restaurants?  Our view is that any of these chains could be ‘go-private’ candidates at any point.  Many management teams have grown very tired of living by a monthly or quarterly benchmark of same-store sales growth.  We have identified several others we think can easily be taken private in the months or years ahead.  The only caveat is a simple one: these management teams and corporate insiders will have to want to go private.  Here are a few other dining chains to possibly consider.

Ruth’s Hospitality Group Inc. (NASDAQ: RUTH)… Great steaks, hot steak ovens, upscale, and worth one-quarter of its 2005 to 2006 post-IPO peak.  It has a loyal customer base (even if the Houston Ruth’s needs a major face lift) because of great steaks and its $170 million valuation offers much room for a buyer to milk more money out of the model whether a buyer would want to grow the chain count or not.  Sales in 2010 were $357.6 million.  At $5.20, its 52-week range is $3.15 to $6.60.

The Cheesecake Factory Incorporated (NASDAQ: CAKE)… Great continental food under flagship brand and under Grand Lux.  Valuation is always a concern here at $1.75 billion in market cap against $1.66 billion in 2010 sales.  The price tag may drive away buyers, but the way to milk more money out of this one boils down to a buyer simply cutting the portion sizes by a fraction.  At a share price of $29.69, its 52-week range is $21.56 to $34.00.

P.F. Chang’s China Bistro. Inc. (NASDAQ: PFCB)… Great upscale Chinese or Asian-fusion at flagship brand and more casual and takeout venue of Pei Wei, with the latter having more growth opportunities.  The market cap is $1.08 billion and 2010 sales were $1.24 billion.  With shares at $46.20, its 52-week range is $37.36 to $53.39.  This one now targets roughly 40% of its income to be paid out in dividends.

California Pizza Kitchen Inc. (NASDAQ: CPKI)… Upscale pizza?  This one was supposedly going private before, yet here is still public.  It has a market value of about $400 million and 2010 sales were $642 million.  At $16.35, its 52-week trading range is $12.95 to $22.92.

You have noticed that no buyout targets have been offered up.  For any of these to be taken private it will require that management wants to go private.  Having a cheap stock might not matter in the slightest.  All of these offer at least some of what private equity seeks… Premium products in premium locations, creating at least a partial barrier to entry, with cash flows.  All of these models can be leveraged some and can probably be milked for more cash flow if they were private. A private equity buyer often may treat any restaurant chain more like a cash flow monster than it does a giant growth engine.  After all, there are only so many locations that a single concept can support.

High-end pizza, high-end Chinese, high-end continental, high-end anything… even relatively upscale can work.  If these kick off major cash flows for a private equity investor, all that matters is that they kick off enough consistent cash flow that they can be leveraged up and/or sold off at a higher price to a different buyer down the road while they are busy kicking off cash today.

Just because we believe these can be targets down the road does not mean they will all become targets.  At the end of the day, value is in the eye of the beholder.

JON C. OGG

Buffalo Wild Wings Inc. (NASDAQ: BWLD) is the biggest problem child of the casual dining chain stocks today.  The company tanked last night when it said that its Q1 profit rose 24% to $0.58 EPS on revenue of $152.3 million; Thomson Reuters had estimates of $0.57 EPS and revenue of $154.4 million. The problem is same-store sales that puts its forecast of 20% earnings growth at risk.  The quarter’s same-store sales rose only 0.1% and only 0.7% at franchised restaurants.  The problem is that both classes saw drops of roughly 3.7% at company-owned stores and fell 2.4% at franchise stores so far in April.  If you look at the prior growth of 20%, the implied earnings comes to about $2.04 EPS for the fiscal-year.  Thomson Reuters is looking for $2.06 EPS.  Its shares are down 18.4% at $41.61.

Panera Bread Co. (NASDAQ: PNRA) is the other problem child, just to a lesser extent.
Earnings were $0.82 EPS, matching estimates. Revenues gained by 14% to $364.2 million and same-store sales rose 10% for company sites and 9.2% at franchise stores.  While Panera reiterated guidance, the slowing of growth was too much for a growth stock to handle.  The company sees next quarter of $0.81 to $0.83 EPS on 8.5% to 9.5% in same-store sales; and it reiterated a 2010 expected range of $3.40 to $3.44 EPS with a 6.5% to 7.5% gain in same-store sales.  The quarterly estimate from Thomson Reuters is $0.84 EPS next quarter and the annual estimate is $3.52 EPS.  Panera shares are down 6% at $81.00.

Texas Roadhouse Inc. (NASDAQ: TXRH) and Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB) are different in that they are ‘bar-b-q’ and burger chains, but both are growth chains and are marketing to the same customers.  Texas Roadhouse is down 7.8% at $14.32 and Red Robin is down 6% at $24.13.

The Cheesecake Factory Incorporated (NASDAQ: CAKE) and PF Chang’s China Bistro Inc. (NASDAQ: PFCB) may be a tad higher up the casual dining food chain with slightly higher average ticket items, but they are getting hit today as well.  Cheesecake is down 6% at $27.77 and PF Chang’s is down 5.8% at $43.73.

Two other casual dining behemoths are down with the sector, although as they are mature they are down less than the higher-beta growth chains: Darden Restaurants, Inc. (NYSE: DRI) and Brinker International Inc. (NYSE: EAT).

Darden Restaurants Inc. (NYSE: DRI)  has Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, and Seasons 52.  Because it has more than 1,700 locations, its stock is down “only” 2.1% at $46.01.  Brinker International Inc. (NYSE: EAT) is down worse than Darden, but is off “only” 3.8% at $18.88.  It has almost 1,700 chains among its Chili’s Grill & Bar, On The Border Mexican Grill & Cantina, and Maggiano’s Little Italy chains.

Chipotle Mexican Grill, Inc. (NYSE: CMG) is down as collateral damage and is meant for reference only.  It is after a lower per-person ticket and is the old McMex play.  This stock also rose almost $20.00 after earnings and guidance were better than expected just last week.  Its stock is down 2.3% mid-day at $135.83.

There are many issues that explain this.  Some will say that it is a more competitive environment.  Some already have.  But at the end of the day, this is a huge disappointment when you consider that we are supposed to be in the midst of a recovery and when people are finally getting hired back to actual paying jobs.  This is a notion that Americans are still hanging on to value and thriftiness, and for longer than what many analysts and economists (and company executives) have been thinking.

JON C. OGG

Altria Group Inc. (NYSE: MO) and HJ Heinz Co. (NYSE: HNZ) offered guidance this week with the promise or hint of a higher dividend payout coming soon.  Daimler AG (NYSE: DAI) and Home Properties Inc.’s (NYSE: HME) cut their dividends this week and the reactions look far from favorable.  In the new-normal, ,any investors are looking for return via income rather than just growth shares that have no income paid to common holders.  A description and yield has been broken down for each.

The Coca-Cola Company (NYSE: KO) raised its dividend by over 7% to $0.44 per quarter.  This DJIA component now commands a dividend yield of 3.15%.  As far as its dividend coverage, there are far more dividend hikes possible down the road.  Thomson Reuters expects 2010 earnings at $3.42 EPS and 2011 earnings at $3.74 EPS.  With annual payments now being $1.76, there is plenty of room for Coke to pour more cash out of the fountain machines into the cups of shareholders.  Also seen was a hike from Coca-Cola Enterprises (NYSE :CCE), which raised its quarterly dividend by 12.5% to $0.09 per common share.  Its new yield based on Thursday’s close is about 1.8%.

Tiffany & Co. (NYSE: TIF) was very much a surprise to see it raise the quarterly payout.  Even if the company has held up far better in the recession than many would have guessed, it does have significant exposure to the economy due to it being a jewelry company.  The dividend was bumped up 18% to $0.20 per quarter for a current future yield of about 1.85%.

Gold miners and producers are almost never thought of as big dividend bets.  Yet Kinross Gold Corporation (NYSE: KGC) and AngloGold Ashanti (NYSE: AU) hiked their quarterly payouts from a year ago.  Kinross’ Board of Directors declared a $0.05 per share dividend.  That is the same semi-annual dividend announced in September-2009 but is up from the March-2009 level of $0.04.  The yield there is about 0.5%.  AngloGold Ashanti (NYSE: AU) announced that its final dividend of 70 South African cents per share is 17% more than the interim dividend of 2009.  Its total dividend declaration of 130 South African cents was listed as a 30% improvement on 2008′s final declaration.

P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) was a dividend surprise.  The company said that the amount of its cash dividend will be based on 45% of its quarterly net income and is expected to total approximately $0.90 per share relating to fiscal 2010.  Before this week there had been no dividends paid to holders.  Based upon Thursday’s close the stock’s dividend yield is 2.1%.

Transocean Ltd. (NYSE: RIG) has never been thought of as a huge dividend stock.  This week its board authorized CHF 3.5 Billion for share buybacks and will seek shareholder approval for a US$1.0 Billion dividend.  The dividend portion here is listed as about $3.11 per share, which would generate a yield of 3.7%.

Altria Group Inc. (NYSE: MO) did not hike its dividend, but hinted that another hike is coming down the road.  Altria reaffirmed this week that it expects 2010 guidance to increase to a range of $1.85 to $1.89 EPS, representing a growth rate of 6% to 8% from an adjusted base of $1.75 per share in 2009….. “As a result of the challenging economic environment” it revised its mid-term adjusted EPS growth objective to 7% to 9%.  The company noted, …”which offers an attractive EPS and dividend growth prospect to shareholders.”  In short, more hikes are coming on top of its almost-7% yield.

HJ Heinz Co. (NYSE: HNZ) raised its guidance this week to $2.82 to $2.85 EPS for 2010 and noted for the dividend in 2011…. “delivering very strong cash flow and, to that end, we expect to deliver a dividend increase for Fiscal 2011 commensurate with our strong profit growth.”  The current dividend yield here is about 3.7%.

Daimler AG (NYSE: DAI) acted yesterday as the poster child of what not to do.  The German car giant gave a 2010 outlook meant to reassure investors that was far from reassuring. It posted an unexpected net loss in it latest quarter and decided that it would scrap its annual dividend/  We saw shares down almost 7% early Thursday but the stock’s ADR ended up closing down ‘only’ 4.7%.

Home Properties Inc.’s (NYSE: HME) gave fourth-quarter earnings last night and the apartment REIT said that its profit was down by more than 50%.  It then proceeded to cut its quarterly dividend by 13% because of a delayed economic recovery expectation.  Most investors buy REITs because they have high payouts and it looks like the 5.8% yield here is no more.

If you are a dividend and income oriented investor, we have lists of companies which have not yet hiked their dividends or not yet started paying dividends that we expect to see raises to in 2010.  The primary list of giants we expect to raise their dividends includes J.P.Morgan Chase & Co. (NYSE: JPM), General Electric Co. (NYSE: GE), and many others.  A second list includes Mattel, Inc. (NYSE: MAT), American Water Works Company, Inc. (NYSE: AWK), Exxon Mobil Corp. (NYSE: XOM), and others for dividend hikes.

You are invited to join our free daily email distribution list to hear about top analyst upgrades and downgrades, IPOs and secondary offerings, ongoing day trader and options trader alerts, stock and market rumors, Buffett and guru investor news, M&A and more.

JON C. OGG
FEBRUARY 19, 2010