Benihana Could Offer Tasty Returns

Among the corporate casualties of this recession are many restaurant companies, many of which have stock values now priced at less than $5 -- some at even less than $1. Some of those stocks are justifiably low, and those companies could wind up bankrupt. Others, though, could weather the economic storm and see stock price appreciation in the future. I am beginning to explore low-priced restaurant stocks to determine which will be the survivors and which will be goners once the recession has ended. The first stop is Tokyo ... by which I mean Benihana (BNHNA - commentary - Cramer's Take)

Benihana is a teppanyaki-style restaurant, offering Japanese food that is cooked in front of diners on large grills under the Benihana brand. In addition the company operates RA Sushi and Haru Sushi branded restaurants. Benihana has been around in this country for many decades, but the company has undergone a systemwide restaurant renovation over the past few years and is currently expanding to new locations.

Benihana reported companywide sales decline of 3.7% for the fiscal third quarter ended Jan. 4. Same-store comparable sales fell 11.1% companywide and 10.9% at the Benihana brand. Accounting for the difference in these two sales metrics was the opening of new and newly renovated units during the period. Benihana operates 94 restaurants, of which 63 are Benihana, nine are Haru Sushi and 22 are RA Sushi. Five new restaurants are expected to open for both the remainder of this year and in the next fiscal year.

For the first half of the current fiscal year, Benihana earned 23 cents a share vs. 39 cents in the same period a year earlier. Along with that report, issued in October, the company guided to full-year EPS of 40 to 45 cents. Given the accelerated slowdown in the last quarter and the sales report just issued this month, I am wary of the company's ability to meet those targets. Let's not ignore Benihana profitable track record -- I believe the company will continue to generate profits through this economic slowdown. Conservatively, I expect Benihana to earn 35 cents a share in fiscal 2009 and 40 cents a share in fiscal 2010. While those EPS estimates are way down from peak earnings of 87 cents a share in fiscal 2006, I believe we are approaching a trough in earnings in the next year.

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At the time of publication, Rothbort was long BNHNA, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.