24/7 Wall St. » RUTH

24/7 Wall St. Closing Bell (COP, GILD, AMSC, MA, COH, LNKD, ATVI, CPST, GPRE, KONA, TRLG, LGF, MOVE, NBL, PCYC, ALU, FLIR, RUTH, FSLR, CIE, TBAC, RPXC, AMRS)

Paul Ausick — Fri, 10 Feb 2012 21:07:37 +0000

All three major US stock indexes opened lower this morning and the day was mostly a gentle slide for the rest of the trading session. The failed Greek debt deal weighed on futures this morning and nothing came along during the day to lift anyone’s spirits. US consumer sentiment fell slightly in January, the US trade deficit grew, and the federal budget deficit shrank, but now by enough to ignite buyers. Remarks by Fed chairman Bernanke on how to fix the housing mess didn’t offer anything new either. With equities and commodities all lower, the dollar index rose 0.523% today to 79.140. Crude oil is down today, with WTI down -1.04% at $98.80/barrel and Brent down -1.05% at $117.35/barrel. Gold settled down -0.9% at $1,725.30/ounce.

The unofficial closing bells put the DJIA down more than 89 points to 12,801.23 (-0.69%), the NASDAQ fell more than 23 points (-0.8%) to 2,903.88, and the S&P 500 fell -0.69% or more than 9 points to 1,342.64.

There were several analyst upgrades and downgrades today, including ConocoPhillips (NYSE: COP) raised to ‘buy’ at Deutsche Bank; Gilead Sciences Inc. (NASDAQ: GILD) started as ‘overweight’ at both Barclays and Morgan Stanley; American Superconductor Corp. (NASDAQ: AMSC) raised to ‘buy’ at Goldman Sachs; Mastercard Inc. (NYSE: MA) reiterated as ‘buy’ and target price raised to $450 at Argus; and Coach Inc. (NYSE: COH) started as ‘buy’ at Citigroup.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: LinkedIn Corp. (NASDAQ: LNKD) is up more than 18% at $90.44 (more coverage here); Activision Blizzard Inc. (NASDAQ: ATVI) is down -2.84% at $12.30; Capstone Turbine Corp. (NASDAQ: CPST) is down -9.8% at $1.26; Green Plains Renewable Energy Inc. (NASDAQ: GPRE) is down -3.5% at $11.20; Kona Grill Inc. (NASDAQ: KONA) is down -3.8% at $6.05; True Religion Apparel Inc. (NASDAQ: TRLG) is down more than -27% at $26.75; Lions Gate Entertainment Corp. (NYSE: LGF) is up 6.5% at $11.73 after posting a new 52-week high of $12.24 earlier today; Move Inc. (NASDAQ: MOVE) is up 14% at $8.65; Noble Energy Inc. (NYSE: NBL) is down -2.7% at $100.70; Pharmacyclics Inc. (NASDAQ: PCYC) is up more than 14% at $22.65 after posting a new 52-week high of $23.57 earlier today; Alcatel Lucent (NYSE: ALU) is up more than 13% at $2.2 (more coverage here); FLIR Systems Inc. (NASDAQ: FLIR) is down -3.3% at $24.90; and Ruth’s Hospitality Group Inc. (NASDAQ: RUTH) is up 3.2% at $6.19.

Other standouts from today include the following stocks:

First Solar Inc. (NASDAQ: FSLR) is down more than -10% at $43.94. The thin-film solar panel maker is having trouble meeting a financing requirement related to the sale of one of its solar farms to Exelon Corp. (NYSE: EXC). More coverage here.

Tandy Brands Accessories Inc. (NASDAQ: TBAC) is up nearly 71% at $1.77. The clothing accessories maker announced strong earnings and two new brand licensing agreements today.

Cobalt International Energy Inc. (NYSE: CIE) is up 35% at $32.27 after posting a new 52-week high of $36.51 earlier today. The independent oil & gas producer reported significantly better-than-expected flows from a test well offshore of Angola.

RPX Corp. (NASDAQ: RPXC) is up more than 11% at $19.21. The patent risk management company has a contract with Alcatel Lucent that could be very valuable as the larger company begins more aggressively to license its 29,000 patents.

Amyris Inc. (NASDAQ: AMRS) is down more than -28% at $6.95 after posting a new 52-week low of $6.85 earlier today. The biofuel maker’s stock was downgraded following a negative outlook from the company for 2012.

Stay tuned for Monday. We have noted the following events on the schedule (all times Eastern):

11:30 a.m. – 3- and 6-month Treasury bill auctions

Have a great weekend.

Paul Ausick

Filed under: 24/7 Wall St. Wire Tagged: ALU, AMRS, AMSC, ATVI, CIE, COH, COP, CPST, FLIR, FSLR, GILD, GPRE, KONA, LGF, LNKD, MA, MOVE, NBL, PCYC, RPXC, RUTH, TBAC, TRLG

M&A Watch: Do All Restaurant Chains End Up Private? (MSSR, MRT, RUTH, CAKE, PFCB, CPKI)

Administrator — Thu, 07 Apr 2011 17:05:40 +0000

Landry’s, Lone Star, Capital Grille, Outback, Smith & Wollensky, and on and on… How many public restaurant and dining chains can be taken private? Apparently many more. McCormick & Schmick’s Seafood Restaurants, Inc. (NASDAQ: MSSR) is under a tender, Morton’s Restaurant Group, Inc. (NYSE: MRT) is seeking a buyer, and we have a line-up of other casual dining or upscale dining chains which we think can join in the waves of public food chains that have gone private.

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

Filed under: Food, Mergers and Buy Outs, Private Equity, Retail Tagged: CAKE, CPKI, MRT, MSSR, PFCB, RUTH

Financial Facelift For Ruth (RUTH)

247wallst — Wed, 23 Dec 2009 15:20:14 +0000

Ruth’s Hospitality Group Inc. (NASDAQ: RUTH) is trying to get its financial house more in order. The owner and operator of the Ruth’s Chris Steak House chain announced new financial steps last night that involve a private equity firm and should rework its credit facility and push out its debt maturity while giving it more flexibility to run. Unfortunately, there is little excitement about this so far as it brings more dilution to common shareholders.

Ruth’s entered into an agreement with affiliates of private equity firm Bruckmann, Rosser, Sherrill & Co. Management, L.P. to purchase $25 million of newly created Series A 10% Convertible Preferred Stock in a private investment in public equity transaction, a “PIPE” investment. The initial conversion price will be equal to 115% of the per share subscription price in the rights offering, provided that the initial conversion price will not be higher than $3.25 or lower than $2.90. These funds will repay debt under its existing credit facility. Ruth’s also plans to issue a stock offering of up to $35 million in new stock under supplemental prospectus filing.

The amendment to the credit agreement will reduce the revolving loan commitment to $130 million, down from $175 million, and will extend the scheduled maturity of the credit agreement out by two years to February 2015. This will also give Ruth’s a less restrictive set of covenants under which it currently operates and will call for no financial covenant testing until the end of fiscal year 2010. The amendment does provide for higher interest rates under the credit facility, with interest rates based on the actual leverage ratio, ranging from 3.25% to 5.00% above the applicable LIBOR rate or, at Ruth’s option, from 2.00% to 3.75% above the applicable base rate.

Ruth’s has successfully completed the sale of its corporate headquarters and intends to relocate to another location in Heathrow, Florida, with the sale generating net proceeds of about $9.7 million that are being used to reduce borrowings under the credit facility.

Shares are down by 6.7% at $2.51 today on over 150,000 shares early this morning. Average volume is about 213,000 shares and the 52-week trading range is $0.70 to $4.74. This continues to be one of the few steak house chains that private equity firms were not able to gobble up during the private equity boom.

JON C. OGG

Posted in Food, Private Equity, Retail, Secondary Offering Tagged: RUTH

Ruth’s Chris, or Ruth’s Hospitality, Raising Cash (RUTH)

247wallst — Thu, 25 Jun 2009 20:43:07 +0000

Ruth’s Hospitality Group, Inc. (NASDAQ: RUTH) has filed a shelf registration to raise capital. The owner of the Ruth’s Chris Steak House chain has filed a mixed securities shelf to raise up to $200 million in new capital.

The filing will allow the company to sell any combination of Common Stock, Preferred Stock, Depositary Shares, Warrants, Subscription Rights, Debt Securities, Share Purchase Contracts, and Share Purchase Units. The company said the use of funds will be earmarked for the repayment of debt and/or for general corporate and working capital purposes.

The “additional registrants” in the actual filing look to be operations in Texas, Louisiana, and Florida. For a comparison on the size of the offering to the company today, the market cap as of today’s close at $3.40 per share was listed as $82+ million.

A personal note (and plea) from Houston….. Dear Ruth, Please remodel your Richmond branch in Houston. That version of Ruth’ Chris is long in the tooth and could use a face lift.

The full SEC Filing is here.

Jon C. Ogg
June 25, 2009

Posted in Food, Luxury, Retail, Secondary Offering Tagged: RUTH

Top Pre-Market Analyst Downgrades (ACAS, BSX, CMVT, FSS, HPY, MRT, NENG, OTEX, RRI, RUTH)

247wallst — Wed, 01 Oct 2008 06:50:10 +0000

These are some of the downgrades and cautious analyst calls we are seeing this Wednesday morning:

American Capital (ACAS) Cut To Underweight from Neutral By JP Morgan.
Boston Scientific (BSX) Cut to Underperform at Merrill Lynch.
Comverse Tech (CMVT) Cut to Sell at Canaccord.
Federal Signal Corp. (FSS) Cut to Sell at Goldman Sachs.
Heartland Payment Systems (HPY) Cut to Underweight at JPMorgan.
Morton’s Restaurant (MRT) Cut to Market Perform at Wachovia.
Network Engines (NENG) Cut Hold at Cantor Fitzgerald.
Open Text (OTEX) Cut to Hold at Canaccord.
Reliant Energy (RRI) Cut to Neutral at Credit Suisse.
Ruth’s Hospitality (RUTH) Cut to Market Perform at Wachovia.

Jon C. Ogg
October 1, 2008

Posted in Analyst Calls Tagged: ACAS, BSX, CMVT, FSS, HPY, MRT, NENG, OTEX, RRI, RUTH

52-Week Low Club (December 28, 2007)

247wallst — Fri, 28 Dec 2007 15:01:00 +0000

Some of these stocks hit 52-week lows and recovered off of lows so they won’t have a low close. But these did all touch or breach the 52-week lows. At the end we also broke out retail stocks, financial stocks, airlines & transports, and hotels. A separate report could have been compiled for REIT’s as well, but many of those were left off because of room or volume. There were enough 52-week lows today that you might even wonder if there had been a mini-crash in the markets. Here are the 52-week lows for December 28, 2007:

Advanced Micro Devices (NYSE: AMD)… imagine if the company got Hector Ruiz to leave.
American Greetings (NYSE: AM)…again.
AstraZeneca (NYSE:AZN)… new entrant.
Carmike Cinemas (NASDAQ:CKEC)
ChipMOS (NASDAQ:IMOS)
Corp. Office Property (NYSE: OFC)
Cryptologic (NASDAQ: CRYP)
Diebold (NYSE:DBD)
Fortune Brands (NYSE:FO)
Group 1 Auto (NYSE: GPI)
Infinera Corp. (NASDAQ: INFN)
Introgen (NASDAQ:INGN)
Japan Smaller Cap Fund (NYSE: JOF)
Lamar Advertising (NASDAQ: LAMR)
Legget & Platt (NYSE: LEG)
Martha Stewart (NYSE: MSO)
Marvell Tech (NASDAQ:MRVL)
Mattel (NYSE:MAT)
McClatchy (NYSE:MNI)
Micron Tech (NYSE:MU)
NGAS Resources (NASDAQ:NGAS)
Nortel Networks (NYSE:NT)
Owens Corning (NYSE:OC)
Omnicare (NYSE:OCR)
Prestige Brand (NYSE: PBH)
PC-Tel (NASDAQ:PCTI)
Ruth’s Chris (NASDAQ:RUTH)
SanDisk (NASDAQ: SNDK)
Theravance (NASDAQ:THRX)
Tractor Supply (NASDAQ:TSCO)
Wendy’s (NYSE: WEN)
World Fuel Services (NYSE:INT)
U-Store-It (NYSE:YSI)

Retail Stocks on 52-week lows: Ann Taylor (NYSE:ANN), Big Lots (NYSE:BIG), Borders Group (NYSE:BGP), Bon Ton Stores (NASDAQ:BONT), Chico’s FAS (NYSE:CHS), Finish Line (NASDAQ:FINL), Liz Claiborne (NYSE: LIZ), Macy’s (NYSE: M), Office Max (NYSE:OMX), Petsmart (NASDAQ:PETM), Stage Stores (NYSE:SSI)

Financial stocks on 52-week lows: Bear Stearns (NYSE: BSC), Citigroup (NYSE:C), Canseco (NYSE: CNO), Discover Financial (NYSE: DFS), Fifth Third Bancorp (NASDAQ:FITB), Fortress Investment (NYSE: FIG), MBIA Inc. (NYSE: MBI), Washington Mutual (NYSE:WM)… urgh! When does it stop?

Airlines/Transports on 52-week lows: Airtran Holdings (NYSE: AAI)…again. Did they launch a Friends Die Free rewards plan? Continental Airlines (NYSE:CAL), Fedex (NYSE:FDX), Mesa Air (NASDAQ:MESA), Northwest Airlines (NYSE: NWA)… near $100 oil is a real pain.

Hotels Hitting 52-week lows: Host Hotels (NYSE: HST), Lasalle Hotel (NYSE: LHO), Starwood Hotels (NYSE:HOT), Sunstone Hotel (NYSE: SHO), Wydham Worldwide (NYSE:WYN). Maybe these all wish they could get the private equity buyers back in the sector. If only they could still borrow.

These CEO’s new year’s resolutions are all the same: "In 2008 I want to keep my stock off the 52-week low lists."

Jon C. Ogg
December 28, 2007

Pre-Market Stock News (December 20, 2007) (ACN, ATVI, ALTU, ARRY, ATHX, BSC, BX, CAKE, ECHO, INTU, FDX, MLHR, IDEV, LDK, LEG, LOCM, NKE, ORCL, PIR, RIMM, RAD, RUTH, SMOD, SCS, DEEP, TRB)

247wallst — Thu, 20 Dec 2007 08:02:20 +0000

This is not every bit of news on individual stocks but this is the major news affecting many shares in pre-market activity this Thursday morning:

Accenture (ACN) stock up 4% after posting $0.60 EPS vs. estimate of $0.56.
Activision (ATVI) again guided earnings higher.
Altus Pharmaceuticals (ALTU) traded down almost 20% after it reacquired ALTU-238 development and commercialization rights for North America from Genentech, an end to the development pact.
Array BioPharma (ARRY) traded down almost 20% after it announced initial results from a Phase II study comparing its monotherapy with temozolomide in the first-line treatment of advanced melanoma showed no apparent difference in efficacy for the primary endpoint.
Athersys (ATHX) and Angiotech announce authorization of Phase I stem cell trial for heart attacks.
Bear Stearns (BSC) expected to post first loss.
Blackstone (BX) plans to sell a $9 Billion CMBS offer backed by Hilton Hotels in Q1 2008.
Cheesecake Factory (CAKE) had a 10% stake taken by activist Nelson Peltz.
Electronic Clearing house (ECHO) getting acquired by intuit for $17.00 per share.
FedEx (FDX) $1.54 EPS vs. $1.50 estimates (had been lowered) but next quarter $1.15-1.30 vs. $1.38 est.; $6.40 to $6.70 for year bvs. $6.47 estimate.
Herman Miller (MLHR) $0.72EPS Vs. estimate of $0.59; stock rose about 10%.
Indevus Pharma (IDEV) trading down about 5% on a non-approvable letter from the FDA for VALSTAR NDA supplement (submitted May 2007).
Intuit (INTU) paying $131 Million for ECHO.
LDK Solar (LDK) $0.37 EPS on $157M revenues vs. $0.37/$143.22M est.; Q4 guidance $0.40-$0.41 on $180-$185M revenues vs. $0.41/$167.5M est.; stock indicated down 5%.
Leggett & Platt (LEG) stock down about 5% on lower guidance.
Local.com (LOCM) announced a strategic partnership with IAC/Interactive’s Citysearch; stock trading up 7% on news.
Nike (NKE) traded up 3% after $0.71 EPS on $4.3 Billion revenues vs. estimates $0.66/$4.3B.
Oracle (ORCL) traded up 6% after beating earnings and giving slightly higher guidance; sees enterprise spending lasting into 2008.
Pier 1 (PIR) -$0.11 EPS vs -$0.24 estimate.
Research-in-Motion (RIMM) reports earnings after the close today.
Rite Aid (RAD) indicated down about 5% after posting loss.
Ruths Chris (RUTH) gave an earnings warning.
Smart Modular Tech (SMOD) $0.18 EPS vs. $0.17 estimate.
Steelcase (SCS) $0.30 EPS vs. $0.28 estimate.
Superior Offshore (DEEP) signed a letter of intent with a strategic partner for ownership of a DP-III deepwater construction and dive support vessel expected to be delivered in late 2008.
Tribune (TRB) buyout supposedly set to close today.

Jon C. Ogg
December 20, 2007

Top Earnings Next Week: July 30 & 31 (APC, FPL, HUM, MNST, OSTK, RSH, SUNW, VZ, AEP, ADP, AVR, BWLD, CMG, COH, RIO, FSLR, GM, IACI, IMCL, NVT, NMX, RNWK, RUTH, SIRI, UA, WFMI)

247wallst — Fri, 27 Jul 2007 15:43:36 +0000

MONDAY, JULY 30, 2007
ABN AMRO (ABN)
Anadarko Petroleum Corp. (APC)
Archer Daniels Midland (ADM)
Cameco (CCJ)
FPL Group (FPL)
HSBC Holdings (HBC)
Humana (HUM)
Monster Worldwide (MNST)
Overstock.com (OSTK)
RadioShack Corp. (RSH)
Simon Property (SPG)
Statoil (STO)
Sun Microsystems (SUNW)
Principal Financial Group (PFG)
Tyson Foods (TSN)
Verizon (VZ)
Wm Wrigley (WWY)

TUESDAY, JULY 31, 2007
Alcan (AL)
American Capital Strategies (ACAS)
American Electric Power (AEP)
Aon Corporation (AOC)
Automatic Data Processing (ADP)
Aventine Renewable Energy (AVR)
Avon Products (AVP)
Buffalo Wild Wings, Inc. (BWLD)
CBS Corp. (CBS)
Chipotle Mexican Grill (CMG)
Coach, Inc. (COH)
Companhia Vale do Rio Doce-CVRD (RIO)
Crown Castle International (CCI)
CryoLife, Inc. (CRY)
Denny’s Corp. (DENN)
DreamWorks Animation SKG (DWA)
Encore Acquisition Company (EAC)
FEI Company (FEIC)
First Solar (FSLR)
Fresh Del Monte (FDP)
Gartner (IT)
General Cable Corp. (BGC)
General Motors (GM)
Headwaters Inc. (HW)
IAC/Interactive (IACI)
ImClone Systems (IMCL)
IndyMac Bancorp (IMB)
Liz Claiborne (LIZ)
Marathon Oil (MRO)
MetLife Inc. (MET)
NAVTEQ Corp. (NVT)
NCR Corp. (NCR)
Nicor Inc. (GAS)
Northwest Airlines (NWA)
NYMEX Holdings (NMX)
PMI Group (PMI)
RealNetworks (RNWK)
RenaissanceRe Holdings (RNR)
Ruth’s Chris Steak House (RUTH)
SiRF Tech (SIRF)
Sirius Satellite Radio (SIRI)
St. Joe Company (JOE)
Trimble Navigation (TRMB)
Tupperware Brands (TUP)
Turbochef (OVEN)
Under Armour (UA)
Valero Energy (VLO)
Vornado Realty Trust (VNO)
Waste Industries (WWIN)
Waste Management (WMI)
Watts Water Tech (WTS)
WebMD Health (WBMD)
Whole Foods Market (WFMI)

We will be following up with many of these individually over the weekend and early in the week with full earnings previews. Have a great weekend.

-The 24/7 Wall St., LLC team

How Cheesecake Factory Can Fix Its Downgrade Problems (CAKE)

247wallst — Thu, 21 Jun 2007 10:03:10 +0000

Cheesecake Factory (CAKE-NASDAQ) is trading down more than 7% to $24.80 on almost triple its normal volume after multiple analyst downgrades based upon comments from a growth conference. Yesterday, at a William Blair Growth Conference, Cheesecake Factory said second-quarter revenue would increase by 14.5% to 15.5%, implying sales of $369.4 million to $372.6 million. The problem is that analysts’ consensus forecast is $378.9 million, according to First Call.

This morning Bear Stearns downgraded shares from ‘Outperform’ to ‘Peer Perform’ because higher dairy costs won’t be fully offset by higher menu prices. Raymond James also downgraded shares from a ‘Strong Buy’ to an ‘Outperform’ rating. CIBC World Markets also cuts its ‘Sector Outperform’ rating to a lower ‘Sector Perform’ rating, and Robert W. Baird maintained a ‘Neutral’ rating but trimmed earnings estimates. Back on June 8, shares fell after FBR removed the company from its ‘Top Pick list’ of stocks. On June 1, shares were trading at $28.39.

Part of the problem is that the food chain is not really in the middle of the road dining establishments and it isn’t really considered ultra-fine or upscale dining. It’s above the Darden (DRI-NYSE) and Brinker (EAT-NYSE) restaurant chains, and below the high-end steakhouses like Ruth’s Chris (RUTH-NASDAQ). So what can the company do to offset higher dairy costs and higher food costs? The company operates ‘The Cheesecake Factory’ and ‘Grand Lux Cafe’ restaurants and if you have been to either of these you will know what I mean when I say "Beltbuster servings" and "To-Go Leftovers." The portions here are gi-normous where most appetizers can be entrees and entrees can be split. Higher prices were already indicated as an offset to higher dairy prices, but the company can easily cut down the portions by as little as 5%. Food cost cuts in a restaurant add right to the bottom line if they aren’t noticed, and the company doesn’t even have to announce they are trimming the sizes if it is by this little. Most consumers will say this is foodie-sacrilege, but at this operator it will never be missed.

As a reminder, this is a stock that Jim Cramer also said in April could be a target of private equity or a management-endorsed buyout.

Jon C. Ogg
June 21, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in any of the companies he covers.