Home > Stock Analysis

Morton's Delivers An Unsavory Q3

Posted: Oct 31, 2007 08:59 AM by Glenn Curtis

Tickers in this Article: RUTH, MRT

Morton's Restaurant Group (NYSE:MRT), the company that owns and operates Morton's Steakhouses, just released its third-quarter results, and they were anything but well done.

Get Free Stock Analysis By Email

Shareholders expected better, and as a result, the stock is currently trading right near its 52-week low.

Lackluster Quarterly Results
For the record, in the period ended September 30, the company reported a net loss of 4 cents a share on $78.9 million in revenue. In the comparable period last year, Morton's lost 1 cent a share on revenue of $70.1 million. The lone positive worth noting is that same store sales were up 6.9%.

In conjunction with the earnings announcement, management also said that higher pre-opening expenses will cause the company to earn 46-48 cents a share in Q4. That's well below the 51 cents per share that Wall Street had been expecting.

Tough Times Ahead?
My other concern involves the company's overall strategy going forward. All the talk seems to be about Morton's opening up new locations, and its growth seems predicated upon them. However, what I'm not hearing is how it is going to differentiate itself from the competition like Ruth's Steakhouse (Nasdaq:RUTH) or the countless chains that dot the landscape.

This is important because consumers are spending less money dining out these days, and restaurants need to be different and evolve if they are going to continue to bring people in the door. (To learn more, see Competitive Advantage Counts.)

Next, where are the insiders at this company, sleeping? The stock is near its 52-week low, yet there have been no reports of big insider purchases recently. You would think these guys would step up and buy some shares in the open market as a sign of confidence. In short, the fact that they aren't spending their dough makes me skeptical about the near term future.

The Bottom Line
Morton's Q3 results were mediocre, and its Q4 outlook is lower than what analysts were hoping for. In short, I think the stock has additional downside potential. I could see the shares coming down to the $11-12 mark later in Q4.

Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!

By Glenn Curtis

Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.

Rate this Article: Your Rating: Overall Rating: Vote Now!

MORE STOCK ANALYSIS