Cosi shares jump after 1Q loss narrows on sales jump

Shares of Cosi Inc. jumped Friday after the restaurant chain said strong sales and franchise fees helped its first-quarter loss narrow, and an analyst kept a top rating.

The stock rose 39 cents, or 17.5 percent, to $2.62.

The loss for the period shrank 29 percent, from $4.2 million to $3 million, and revenue rose 7 percent, to $33.2 million from $31.1 million.

Avondale Partners analyst Amy Vinson kept a "Market Perform" and said Cosi is her favorite company among the restaurants she covers.

"We firmly believe that Cosi management is on track to turn this concept around and that there is significant upside to sales, margins, earnings and valuation," Vinson said in a note to clients.

Her $5.50 price target implies she expects shares to jump 147 percent over Thursday's $2.23 close.

Since first-quarter results missed her forecast by a penny, Vinson lowered her 2008 estimates to a loss of 21 cents per share from a loss of 20 cents per share.

Analysts polled by Thomson Financial expect, on average, a loss of 23 cents per share for the year.

Piper Jaffray analyst Nicole Miller Regan expressed concern the company's profit margins slipped 0.3 percent during the period due in part to high commodity prices.

"We continue to believe it is unreasonable to assume restaurant profit margin improvement as the company has yet to achieve leverage," Miller Regan said in a note to clients.

She rates shares "Neutral" with a $3 price target, and raised her 2008 estimate to a loss of 25 cents per share from a loss of 26 cents per share.