Red Robin is Flying High

• Email
• Share
• Print

Shares of Red Robin Gourmet Burgers (Nasdaq: RRGB) rose more than 7% in yesterday's trading following an announcement that might surprise close watchers of the meat marketing business: The company raised fiscal second-quarter financial guidance substantially, pointing investors toward estimated revenue of $93 million and earnings per share (EPS) of $0.33 to $0.44.

That's ahead of previous revenue guidance of $90 to $92 million and projected EPS of $0.26 to $0.27. What's behind the "surprise"? Apart from a $250,000 gain on a property sale, Red Robin pointed toward improved margins driven by restaurant operating improvements and a mid-June price increase, as well as reduced workers compensation costs. And the EPS growth appears to be more than just an accounting creation. The company had more shares outstanding at the end of the first quarter than it did at the end of last year's second quarter.

This is a different tune than many restaurants have sung lately. A bullish market for makers of items such as meat, cheese and eggs -- driven largely by a high demand for protein-heavy meals -- has meant trouble for many of their customers. Those restaurant chains uneasy about increasing prices in response, such as the casual steakhousesa laOutback (NYSE: OSI), are feeling profit pressures at a time when customers should be beating down their doors. (Others talking steak-related stresses include Hardee's operatorCKE (NYSE: CKR) and pizza purveyorPapa John's (Nasdaq: PZZA), to name just two.)

The sustainability of growing restaurant concepts is always watched closely by investors. If you doubt, look at the recent shock to Back Yard Burgers' (Nasdaq: BYBI) system when Yum! Brands (NYSE: YUM) pulled the plug on a development partnership back in May. Given that, it appears that the best news from Red Robin's perspective in this case is really "the story behind the story." That the company can boost prices and profitability when many of its restaurant competitors are feeling pinched bodes well for its future.

Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.