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BJ's Restaurants falls as 3Q results miss Street

NEW YORK -- Shares of BJ's Restaurants fell to their lowest point in two years Friday and two industry analysts downgraded the chain after its third-quarter results fell short of expectations.

THE SPARK: BJ's Restaurants Inc. reported Thursday that it earned 24 cents per share for the period ended Oct. 2. Revenue came in at $175.2 million. Analysts surveyed by FactSet expected earnings of 28 cents per share on revenue of $178.3 million.

THE ANALYSIS: Cowen and Co.'s Paul Westra lowered BJ's Restaurants to "Neutral" from "Outperform," saying its quarterly results were much worse than expected. The company may have at least two more quarters of lackluster results as it will likely be contending with increased competition and a slowdown in sales, he said. Cowen downgraded the entire sector earlier this month, and Westra said Friday that the earnings miss "alters our prior view that BJRI would likely be one of the few casual-dining concepts that could remain relatively unscathed by the decelerating `pre-recessionary' industrywide sales trends seen over the past two months."

Sharon Zackfia of William Blair & Co. said that BJ's had the first inflection into negative traffic trends for the first time since 2009.

He sees earnings growth may now be within the 15 percent to 20 percent range. This compares with 26 percent growth in 2009, 53 percent in 2010 and 36 percent in 2011.

Zackfia said that the third-quarter earnings miss was the company's biggest relative to consensus expectations in at least the past seven years.

The analyst cut her rating to "Market Perform" from "Outperform."

SHARE ACTION: The Huntington Beach, Calif. company's stock dropped $6.15, or 16.1 percent, to $32.13 in afternoon trading. The shares declined to $31.90 earlier in the session, the lowest since October 2010.

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