McCormick & Schmick's Seafood Restaurant (MSSR), based in Portland, Oregon, is a leading national seafood restauranteur operating in the affordable upscale dining segment. The company's traffic and comps are falling at an accelerating rate as the recession and stock market crash darken consumer psychology. With no franchises, the company is highly levered to changes in comps and we expect fourth-quarter EPS to fall 33%.
Longer term however, we think the company is well positioned to weather the recession with a solid balance sheet, well contained G&A expenses, and food and labor costs that in fourth quarter began declining as a percentage of revenue. Low leverage is enabling the company to comfortably continue its expansion plan, which has been greatly scaled back for 2009 to 6 units from 11 planned for 2009.
Nevertheless, we think the economy is likely to worsen before it recovers, and MSSR shares pay no dividend to compensate investors for waiting.
Read the full analyst report on MSSR
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