#$rt

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Ruby Tuesday’s real estate portfolio is worth more than the company itself.

By Laura Berman

Years of poor performance and a diminished brand at Ruby Tuesday Inc. (RT) likely won't stop activist shareholders from salivating over the restaurant chain's vast real estate portfolio.

Ruby Tuesday, which hasn't had a profitable quarter since 2011, on March 13 retained UBS to explore strategic alternatives, including a possible sale. Ten days later, Leon Capital Group LLC reported a 9.5% stake in the company. Leon wrote in a 13D filing that it had entered into a confidentiality agreement with Ruby Tuesday hinting at a potential transaction.

Leon, a real estate investment and development firm, has about $2.5 billion in assets. Given Leon's real estate expertise, it's possible the firm could be urging Ruby Tuesday to sell and lease back its real estate to a restaurant-focused REIT or convert itself into a REIT.

Ruby Tuesday's real estate is worth more than the company itself, which has an enterprise value of $306.5 million. The real estate, however, may be insufficient to tempt a real estate investor, with less tempting sites than competitors like Olive Garden operator Darden Restaurants Inc. (DRI) or Chili's parent Brinker International Inc. (EAT).

Glenn Welling's Engaged Capital LLC holds a 3.34% stake as of March 31, which it began building last fall, well before the strategic review. Welling previously pushed Jamba Inc. (JMBA) to convert itself into a franchised-owned model and using franchise proceeds to buy back stock. Engaged has not commented publicly on its investment or any conversations with management.

Ruby Tuesday in 2011 settled with another pair of activists, Becker Drapkin Management LP and Carlson Capital LP, adding Becker Drapkin chairman Matthew Drapkin to head the company's board. Drapkin served for two years and then sold his shares after resigning.

The Maryville, Tenn.-based company typically holds its annual meeting in October, but announced June 30 that "in light of the ongoing strategic review," the 2017 meeting would be held on Dec. 6. The deadline for shareholders to submit director nominations is Sept. 7.

Shuttering malls and changing consumer tastes for home cooking in favor of fast-casual restaurants have driven major restaurant chains to bankruptcy, including Garden Fresh Restaurant Corp. (Oct. 30), Cosi Inc. (Sept. 28) and Logan's Roadhouse Inc. (Aug. 8).

And plenty of small-cap restaurant chains are facing proxy battles, including Bravo Brio Restaurants Group Inc. (BBRG), which is in a public spat with TAC Capital LLC; Buffalo Wild Wings Inc. (BWLD), whose CEO announced retirement plans after a yearlong dispute with Marcato Capital Management LP; and Fiesta Restaurant Group Inc. (FRGI), which is attempting to placate JCP Investment Management LLC.

Here are some of the stocks the Yahoo Finance team will watch for you today.

Honeywell (HON) shares were down sharply this morning after the industrial products supplier cut its sales outlook for the third quarter and the year. The company is blaming a slowdown in business.

Gap (GPS) shares fell in early trading. While the struggling retailer reported a 3% decline in same-store sales in September, that was a bit better than analysts were expecting — thanks to a rebound in sales at Old Navy, which were up 4% last month.

Ruby Tuesday (RT) fell in early trading, with the restaurant chain posting a much wider-than-expected loss in its latest quarter. Revenue also missed estimates, down more than 8% from a year ago amid restaurant closures and the chain’s efforts to revamp its menu. Ruby Tuesday shares have lost more than half their value since the start of the year.

Stocks (^GPSC, ^DJI, ^IXIC) were lower across the board after the September jobs data showed a slowdown in hiring.

The Labor Department reported that nonfarm payrolls rose 156,000 last month. That’s down from a gain of 167,000 jobs in August and weaker than economists were expecting.  Meanwhile, the unemployment rate edged up to 5%.

The rise in the jobless rate is seen as a positive sign because the increase shows more workers re-entered the labor force.

Hurricane pain

Two million people along the Eastern Seaboard have been warned by officials to move inland as Hurricane Matthew hits Florida. Meanwhile, authorities say the death toll in Haiti from Matthew’s destruction now tops 300 people. How much economic damage will Matthew inflict?

Picture this: a $25B Snapchat IPO

The Wall Street Journal reports that Snapchat’s parent company, Snap Inc., may go public as early as March of next year, valuing the business at $25 billion or more. That’s a large premium to the company’s last valuation of nearly $18 billion in May. Will this signal the revival of a lackluster IPO market?

Stocks to watch

Honeywell (HON) shares were down sharply this morning after the industrial products supplier cut its sales outlook for the third quarter and the year. The company is blaming a slowdown in business.

Gap (GPS) shares fell in early trading. While the struggling retailer reported a 3% decline in same-store sales in September, that was a bit better than analysts were expecting — thanks to a rebound in sales at Old Navy, which were up 4% last month.

Ruby Tuesday (RT) fell in early trading, with the restaurant chain posting a much wider-than-expected loss in its latest quarter. Revenue also missed estimates, down more than 8% from a year ago amid restaurant closures and the chain’s efforts to revamp its menu. Ruby Tuesday shares have lost more than half their value since the start of the year.

Ruby Tuesday (RT) Consumer Discretionary - Hotels, Restaurants & Leisure | Reports January 7, After Market Closes

Key Takeaways

The Estimize consensus calls for revenue of $262.47 million and EPS of -$0.09 for FQ2 2016 earnings

Ruby Tuesday is aggressively transforming its brand to differentiate itself in a crowded bar & grill market

The overall casual dining industry has wavered with the emergence of fast casual dining

What are you expecting for RT? Get your estimate in here!

What was once a thriving industry, the casual dining experience has suffered with the emergence of fast casual restaurants. Changing demographics, the demand for fresh ingredients and digital disruptions have all put pressure on casual dining’s need for change and innovation. Besides Chipotle’s meteoric fall, many restaurants have underperformed in 2015 due to increasing competition and the threat of a minimum wage hike. Ruby Tuesday, which reports January 7th after the market closes, is expected to miss revenue estimates as it has done 4 of the last 5 quarters. In the past, the chain failed to differentiate itself from a crowded bar and grill sector, leading to its  weaker sales. That being said, Ruby Tuesday is aggressively pursuing a brand transformation, to revitalize its status in the restaurant industry. This includes new menu items, limited time offers and marketing campaigns to reimage its restaurants. Despite the company’s initiatives, the Estimize consensus calls for EPS of -$0.09, two cents higher than Wall Street, and revenue of $262.47M, just slightly lower than what the Street is expecting. Compared to FQ2 2015, this represents a YoY increase in EPS of 25%. In the short term, Ruby Tuesday’s is expected to experience waning sales growth as it continues promote new initiatives. Over the past few years, Ruby Tuesday has been plagued by weak sales in an overcrowded casual dining market. The company has only recently devoted resources to differentiate itself and abandon underperforming stores. By transforming the core brand, Ruby Tuesday has successfully reduced costs and improved margins. Based on its new initiatives, Ruby Tuesday expects same store sales and comps to grow in the second half of fiscal 2016. Despite the positive momentum Ruby Tuesday has generated, the prospect of increasing minimum wage, inflationary cost pressures, and competition in a crowded market will take a toll on the company’s profits with share prices to falling 20% in 2015. Do you think RT can beat estimates? There is still time to get your estimate in here!

I had to say goodbye to Ruby Tuesday last weekend too.  Not quite the same as this classic Rolling Stones song, but I am missing her.  For me it was the stock, and my long call options had expired.  It happens all the time.  You lose your dreams and then you lose your mind.  Life can be unkind.

But the stock chart below gives me hope that she just can't go to far away.

Since the beginning of the year, Ruby Tuesday ($RT)  stock price has been building an ascending triangle.  This price pattern often precedes a break out in the stock price higher as the selling supply at the top of the triangle dissipates.  And when it does it creates a target move to 7.25.  The momentum indicators are supportive of a break higher, with the RSI rising and heading toward the bullish zone and the MACD also rising.  

The flat SMA's at 7.00 above may give it a some trouble on the way higher, but a 50 cent move in a $6.50 stock is still a pretty good short term return.  And with the April 7.5 Calls trading at 25 cents it is a low cost defined risk way to participate should it move.

Ruby Tuesday (RT) shares are down about 13% in 2 days. The casual dining restaurant chain's stock has slipped from $7.03 to $6.12 as they approach their FQ2’2014 earnings release scheduled for after the market closes on Wednesday, January 8th. Last year was a phenomenal year across the board for US equities but RT somehow managed to drop 14%. In their previous 2 earnings releases Ruby Tuesday has missed analyst expectations for profit and revenue by wide margins, and analysts are expecting more of the same Wednesday.

The information below is derived from data submitted to the Estimize platform by a set of Buy Side and Independent analyst contributors.

The green line which represents Ruby Tuesday’s profit over the past 2 years has missed the Wall Street consensus in 7 of the past 8 quarters and has never beaten it. Over the same 2 years Ruby Tuesday has also experienced year over year profit shrinkage in pretty much every quarter.

These deteriorating fundamentals, especially in the previous 2 quarters, have had big implications to the company’s stock price.

The two big red candles at the far right represent the drops in the past 2 trading days. The stock is selling off going into the report, analysts are expecting RT to report a loss and investors don’t want to be holding this stock when the quarterly financial results are announced.

At Estimize we crowd-source earnings expectations from buy-side and independent analysts. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, students, and non professional investors the Estimize community has built a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market’s actual expectations. While some contributors are prominent hedge funds, we accept estimates from anyone because we are able to measure so well statistically. Algorithms developed by our deep quantitative research look at correlations between analyst track records and tendencies as they relate to future accuracy to create confidence ratings for all estimates, so its impossible to screw up the data set without a history of precision.

If you look at the table for this quarter, Wall Street is expecting -21c EPS while the Estimize community consensus is forecasting -23c. This differential is often an indicator that earnings expectations may not have been priced into the market. As indicated by the Estimize consensus it's clear that the market is expecting Ruby Tuesday to report a bad quarter. A negative differential between the Estimize consensus and Wall Street expectations has been shown by our quantitative research team to be associated with a downward drift in stock price over the 3 days going into the report if you benchmark against the market. That’s exactly what we are seeing here with Ruby Tuesday, with deteriorating fundamentals on top of it.