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Will Comps Growth Drive Ruby Tuesday's (RT) Q3 Earnings?

Tennessee-based casual dining restaurant chain, Ruby Tuesday, Inc. RT, is set to report fiscal third-quarter 2016 results on Apr 7, after the market closes. The company has an average positive earnings surprise of 46.21% for the trailing four quarters.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Ruby Tuesday is aggressively pursuing brand transformation initiatives. From new menu items to limited time offers, executing marketing campaigns, and re-imaging its restaurants, the company is leaving no stone unturned to satisfy customers and return to profits.

Based on its sales initiatives, the company expects comps in the range of flat to up 1% in fiscal 2016. The company expects third-quarter comps to be almost in line with the full-year outlook supported by menu innovation and brand transformation initiatives.

Meanwhile, these efforts have successfully cut costs and improved margins by reducing marketing expenses. Additionally, Ruby Tuesday’s strategy to exit the non-core brands and shut down underperforming stores is helping it to lower operating costs. These initiatives should aid profits in the to-be-reported quarter.

However, like every other restaurant chain, inflationary cost pressure – especially that of labor – is expected to take a toll on Ruby Tuesday’s profits. The company has incurred losses in 5 out of the last 6 quarters.

Stocks to Consider

Here are a few stocks in the restaurant industry that are likely to beat earnings estimates:

Dave & Buster's Entertainment, Inc. PLAY, with an Earnings ESP of +1.69% and a Zacks Rank #1 (Strong Buy).

Yum! Brands, Inc. YUM, with an Earnings ESP of +1.20% and a Zacks Rank #3 (Hold).

McDonald's Corp. MCD, with an Earnings ESP of +1.74% and a Zacks Rank #2 (Buy).

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YUM! BRANDS INC (YUM): Free Stock Analysis Report
 
MCDONALDS CORP (MCD): Free Stock Analysis Report
 
DAVE&BUSTRS ENT (PLAY): Free Stock Analysis Report
 
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