Cramer's Call: Red Robin Vs. Bloomin' Brands
Are you ready for a food fight?
On Monday, Jim Cramer cooked up a stock battle du jour ala restaurant chain operators Red Robin Gourmet Burgers and Bloomin' Brands. Both stocks are up roughly 60 percent year-to-date, so the "Mad Money" host did some research to determine which he prefers right now.
Bloomin' has more than 1,400 restaurants across the country, which operate under various concepts, including Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse and Wine Bar and Roy's. The company plans to open 30 new locations in the year ahead, which translates into 2 percent growth. It's also remodeling up to 140 of its existing restaurants. Currently, the company has exposure to 21 countries, which Cramer suggested could be problematic given the sluggish world economy. On the other hand, he thinks Bloomin' has a "terrific international growth opportunity" in China, among other promising markets.
Red Robin has just one concept with around 475 locations in total, all of which are located in the United States. The company intends to open 20 new locations in 2013, though, which is growth of about 4 percent. It's also going to remodel roughly 20 stores.
To Cramer, Red Robin has the edge on growth, but Bloomin' will remodel more stores.
In terms of same-store sales, Cramer thinks both companies are even keel. Last quarter, Bloomin' saw a 2.4 percent increase in same-store sales and expects same-store sales growth in the low single digits for the full year. Red Robin forecast a 2.5- to 3 percent increase for 2013.
It seems Red Robin might have a bit more catalysts coming this summer, too, Cramer said. Red Robin plans to roll out two new burgers and an alcoholic drink that's basically one part beer and one part liquor, served in a reusable beer can. Bloomin' plans to offer extended lunch hours, which it thinks will drive increased same-store sales.
As far as the stocks go, Red Robin currently sells for 22 times next year's earnings estimates with a 9.5 percent long-term growth rate. Bloomin', on the other hand, sells for just 18 times earnings with a growth rate of 16.7 percent. Red Robin' trades at 2.35 times growth while Bloomin' trades at just 1.07 times growth.
In the end, Cramer said both companies have similar fundamentals, so he currently prefers the cheaper stock, which is Bloomin', but only consider buying on a pullback.
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