KeyBanc Upgrades Ruby Tuesday (RT) to Hold
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KeyBanc upgrades Ruby Tuesday (NYSE: RT) from Underweight to Hold based on valuation. The company has reached KeyBanc's previous downside price target of $5.50.
The firm said, "Shares of RT are presently trading at 9x our revised CY09 diluted EPS estimate of $0.60 vs. a peer group of 10.4x and at a 30% discount to book value of $7.93 per share. Additionally, while we believe that RT's attempt at differentiation within the highly commoditized bar and grill segment of casual dining is the right decision for the Company over the long term, we believe that consumer acceptance of the upgraded brand will take time in today's macro environment. This leads us to believe that upside to RT's current valuation and share price will remain limited in the near term. Therefore, we believe that a HOLD rating is warranted at this time."
Due to consumer uncertainty related to higher gas prices, a potential economic slowdown, and other macro issues will hurt RT’s re-branding campaign in future quarters. KeyBanc therefore believes that RT's same-store-sales will be slightly negative in FY09.
Ruby Tuesday, Inc., together with its subsidiaries, engages in the development, operation, and franchise of casual dining restaurants under the Ruby Tuesday brand name in the United States and internationally.
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