How Red Robin's Completed Its Huge Recovery

Next Tuesday, Red Robin Gourmet Burgers (RRGB 1.54%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk reaction to news that turns out to be exactly the wrong move.

Red Robin suffered greatly during the recession five years ago, but since then, the restaurant chain has done an exceptional job of restoring itself to full health. Now, with the stock trading at seven-year highs, the company needs to find another catalyst for further growth. Let's take an early look at what's been happening with Red Robin over the past quarter and what we're likely to see in its quarterly report.

Stats on Red Robin

Source: Yahoo! Finance.

Can Red Robin deliver tasty earnings this quarter?
In recent months, analysts have had mixed views on Red Robin's earnings estimates. For the first quarter, they've marked down their projections by $0.04 per share, but that pales in comparison to a more than $0.20-per-share rise in the consensus for the full 2013 year. The stock, meanwhile, has continued to soar, rising 35% since mid-February.

Red Robin has impressed investors for quite a while as its restaurant business has held up better than most people had expected. With extensive short-selling interest, the stock soared in February after the company announced its fourth-quarter results, in which Red Robin defied expectations by seeing profits double and sales remain strong, despite price increases that had bearish investors thinking that its growth streak would come to an end.

What's particularly impressive about Red Robin is how it has achieved its success even in the face of challenges that other restaurant chains are facing. Back in March, Darden Restaurants (DRI -0.21%) reduced its overall sales guidance for fiscal 2013, citing falling same-store sales of between 1.5% and 2.5% in its core Olive Garden, LongHorn Steakhouse, and Red Lobster segments. Similarly, Brinker International (EAT 2.71%) cut its estimate on comps to just 1%, guiding its earnings to the lower end of its previous range in light of falling same-store sales at its mainstay Chili's locations.

One fascinating new concept that Red Robin is working on is its new Burger Works brand, which it started in late 2011 and which essentially uses the trend toward shorter menus that burger giant Five Guys revolutionized. A shortened menu with lowered prices offers a different concept from its regular locations, but with locations in Colorado and Ohio, Red Robin is planning significant expansion in the future.

In Red Robin's quarterly report, watch for more information about the Burger Works concept. If it takes off, it could bring a new leg up for the burger business and its shareholders.

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