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(Updated with additional analyst commentary.)



) -- Shares of

Chipotle Mexican Grill

(CMG) - Get Chipotle Mexican Grill, Inc. Report


BJ's Restaurants

(BJRI) - Get BJ's Restaurants, Inc. Report


Cheesecake Factory

(CAKE) - Get Cheesecake Factory Incorporated Report

surged on Friday after the restaurant chains beat quarterly earnings expectations.

"We're getting indication that top-line trends have improved, especially in the last 90 days or so," Sterne Agee analyst Lynne Collier told


, speaking about casual dining chains like Cheesecake and BJ's. "It's the perfect storm of events where top lines are improving and restaurants are experiencing fairly benign food and labor costs, stable commodity costs, at least for 2010 and not a lot of wage rate inflation."

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, which reported strong earnings early Thursday, are also benefiting from benign costs coupled with better-than-expected top-line performance, she said.

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"McDonald's is just gaining tremendous market share," Collier said.

Like casual dining, the QSR segment has also reported better top-line performance, particularly in the last 60 days, she added, possibly due to seasonal factors where families are more pressed for time during the back-to-school season and are choosing to eat out more at fast-food chains. **

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The analyst said that in the overall restaurant industry it's fairly unusual to see such strong top-line growth coupled with a favorable cost structure. More common is top-line growth offset by less stable input costs.

She sees that trend continuing through October in terms of top-line performance. The restaurant industry's upward trend could be seen as a leading indicator for the economy as a whole. It was one of the first sectors to report softening in 2006, and is now coming out of four years of generally negative same-store sales.

Margins are firming up and year-over-year comparisons are certainly easier, Collier said. Business customers are returning to their dining out habits, as are more affluent consumers, though unemployment remains a challenge, particularly to the lower-income segment of the population.

Chipotle said late Thursday its quarterly profits soared nearly 40%, thanks in large part to an 11.4% jump in comparable same-store sales. Same-store sales measures sales at stores open at least one year, and is a key financial metric of the restaurant industry.

Chains like Chipotle and

Panera Bread


aren't quite fast food, and don't fall into the casual dining category either. Instead, they are considered in a separate category called fast-casual.

"Fast-casual seems to be the strongest segment of all in terms of top-line performance," Collier said. Companies like Chipotle and Panera "have higher-quality food" and modern consumers are "looking for free-range chicken, organic and other food choices considered better quality -- but they want it fast."

Chipotle and Panera are doing a great job offering those choices to their customers, and at a reasonable price point, dishing up a lot of food for the money.

"Great price value situations work well in all economic situations," Collier said.

Panera is due to report quarterly results on Oct. 27.

Chipotle shares surged to an

all-time high of $207.94 in Friday's trading session after reporting its stellar third-quarter earnings late Thursday. The stock closed the day up 14.8%, or $26.52, to close at $205.77.

For the three months ended Sept. 30, the Denver-based Mexican-style food chain reported earnings of $48.2 million, or $1.52 per diluted share, compared with earnings of $34.5 million, or $1.08 per share, in the same period a year ago. Analysts had expected earnings of $1.31 per share. Revenue vaulted 23% to $476.9 million from $387.6 million, driven primarily by the expansion of the company's store base and strong comps growth.

Most stocks in the restaurant sector traded higher as well on Friday. The

PowerShares Dynamic Leisure and Entertainment Portfolio

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, an exchange-traded fund that counts Chipotle as well as industry peers McDonald's,

Yum! Brands

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(SBUX) - Get Starbucks Corporation Report

among its top holdings, closed up 2.5%.

Small-cap restaurateur

BJ's Restaurants

saw its shares skyrocket 17.6% on Friday.

The bar and grill chain said late Thursday its third-quarter profits surged more than 70%, and revenue jumped 24%, as comps increased 6.7%.

Collier reiterated a buy rating on BJ's, citing the company's "impressive" quarterly results. She raised her earnings expectations for 2010 and 2011, and upped her price target on the stock to $33.

Cheesecake Factory

shares closed up by 7.9% Friday after the casual dining chain also beat expectations for the recent quarter, primarily driven by comps growth of 2.8%.

Earnings increased 35% to $22 million, or 37 cents per share. Revenue grew 4.4% to $418.4 million.

Collier maintained a neutral rating on Cheesecake shares, but raised her earnings expectations for the company.

Analysts from JPMorgan issued an upgrade on Cheesecake's stock to neutral from underweight, with a price target of $29.

Piper Jaffray maintained an underweight rating on the stock, but raised its earnings estimates and price target. The analysts set a price target of $25. "While we do not expect

the fourth quarter of 2010 to be trending materially higher, we have tweaked up our

same-store sales estimates in

the fourth quarter of 2010 to account for improving restaurant-level sales," the firm noted.

Chipotle, BJ's and Cheesecake's earnings followed results from McDonald's earlier Thursday, in which the world's largest restaurant chain posted better-than-expected third quarter profits and sales.

McDonald's said early Thursday it grew profits by 10.3% in the recent quarter to $1.39 billion, or $1.29 per share, up from $1.26 billion, or $1.15 per share, in the year-earlier quarter. Results easily beat expectations for earnings of $1.34 billion, or $1.25 per share.

>> McDonald's Beats on Smoothie Sales Gain

McDonald's grew comps 6% globally in the recent quarter, including growth of 5.3% in the U.S., 4.1% in Europe and 8.1% in Asia/Pacific, Middle East and Africa.

>> McDonald's Beats on Smoothie Sales Gain

-- Written by Miriam Marcus Reimer in New York.

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Miriam Reimer


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