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NEW YORK CITY-Bear Stearns has initiated coverage of the Red Robin Gourmet Burgers chain, which is based here, and has issued an “outperform” rating for the chain at the same it has downgraded its rating for Calabasas, CA-based The Cheesecake Factory. Bear Stearns calls Red Robin “a well-positioned casual dining operator, in the early stages of growth,” but it cites “disappointing” earnings per share among the factors in its downgrading The Cheesecake Factory to “peer perform” from its previous rating of “outperform.”

Bear Stearns analyst Ashley Reed’s Red Robin report estimates that the 268-store burger chain’s earnings per share will grow at 20% or better annually for the next three to five years and that Red Robin will nearly quadruple its store base in the long term.

The chain targets families and teens in a way that creates differentiation from competitors, and differentiation “is critical in casual dining, particularly for smaller companies without a significant media budget,” Reed’s report says. It says the company is well positioned to grow to 1,000 U.S. stores eventually, including both company and franchisee expansion.The Bear Stearns outlook on The Cheesecake Factory is tempered by concerns that the chain may miss its earnings estimate again this year. “We are concerned about the potential effect on the shares of another below consensus year,” Bear Stearns says.

With The Cheesecake Factory now operating 93 units and approaching 50% of its targeted 200-unit potential, the analysts’ report says, it may be difficult for the company to raise the target number of total stores and it’s too early to expect the Cheesecake’s Grand Lux Café concept to grow significantly.

“We continue to believe that The Cheesecake Factory can likelygrow EPS 20% or better for the next several years,” Bear Stearns says. However, the Bear Stearns report cautions that as the chain gets closer to its target number of stores, the risk increases that earnings will be disappointing in comparison with financial analysts’ consensus expectations for those earnings.

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