Getting Fat on Hamburgers

The hamburger business is booming at a time when the news backdrop is not good. There to buffet earnings are high fuel prices, lots of drive-through and sit-down competition, health concerns, low-carbohydrate diets, and high beef prices. Yet the purveyors of hamburgers keep upping their earnings guidance.

The latest to see a better quarter ahead is Red Robin Gourmet Burgers (Nasdaq: RRGB  ) . The company supersized its previous high-end guidance from $0.33 a share to $0.43 a share -- a fantastic percentage jump. Making it possible are same-store sales gains of 7.5% to 8.5%.

While rival Steak 'n Shake (NYSE: SNS  ) also saw a fat 6.3% increase in same-store sales last quarter, its earnings increased only 4.6% -- so healthy sales gains do not always translate into extremely healthy profits.

Also consider CKE Restaurants (NYSE: CKR  ) , the purveyor of fast-serve high-end hamburgers. Last quarter the company missed analyst expectations, although sales were strong.

But there are companies getting fat while sales are booming. McDonald's (NYSE: MCD  ) is ringing up excellent results, and, as Seth Jayson pointed out, "For the first half of the year, McDonald's has produced $1.7 billion in cash flow from operations yet laid out only $484 million on capital expenditures." That's a real money machine!

Good results can also be found at Wendy's (NYSE: WEN  ) , Jack in the Box (NYSE: JBX  ) , and my favorite -- car-side burger server Sonic (Nasdaq: SONC  ) .

Great news does not automatically become great value. Red Robin sells for 26 times 2005 earnings -- hardly value priced. Even Sonic sells for a high 21 times 2005 estimates. But consider McDonald's. At 14 times 2005 earnings, Mickey D's is growing and fattening its balance sheet at a time when the burger business is sizzling.

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Fool contributor W.D. Crotty owns stock in McDonald's.