Ruby Tuesday Earnings Preview: Third Quarter 2009

Ruby Tuesday [[RT]] is scheduled to report third quarter 2009 results after the market closes on Tuesday, April 7. Based on our analysis, we at are expecting RT to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $311.5 million and EPS of $.11. This would represent an 11% decrease in revenues from last year’s $351.2 million in the same period. The current analyst consensus calls for revenues of $309.9 million and $.11 EPS.


Management commented on the last earnings call that fiscal 2009 “is the most difficult year since our founding nearly 37 years ago”. That being said, we feel that the company is making the right moves to address the current economic challenges.


The company has implemented aggressive pricing promotions to attract cost-conscious consumers. They have cut costs and have shifted advertising spending to more efficient channels. Our checks show that store traffic has performed better than expected over the last few months despite the difficult economy.


Share Performance

Ruby Tuesday’s shares are up a phenomenal 135% since the beginning of the year. That’s been good news to Ruby Tuesday’s long suffering investors who endured last year’s 84% drop that greatly underperformed the 34% decline in the Dow Jones index.



Shares are now trading at 10x consensus 2010 EPS estimates. This is a discount to the relative valuations of their peer group. While Ruby Tuesday’s shares have already staged a tremendous rally in recent weeks, we believe that the stock could still go much higher.


Recommendation: Buy with a $4.50 price target.

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