Chipotle, Cheesecake Factory Gain on Upgrades

CALABASAS HILLS, Calif. ( TheStreet) -- Chipotle Mexican Grill ( CMG) and Cheesecake Factory ( CAKE) shares jumped Thursday morning following analyst upgrades for the pair of restaurant stocks.

Bank of America/Merrill Lynch ( BAC) analyst Joseph T. Buckley upgraded his rating on Cheesecake Factory shares to buy, from neutral.

Cheesecake Factory shares jumped 3.5% to $30.43 following the upgrade.

The casual dining chain's shares had tumbled on Tuesday after Cheesecake Factory offered disappointing preliminary fourth-quarter sales figures.

The restaurant operator said unaudited revenue for its fiscal-fourth quarter, ended Dec. 28, was $417 million, up from $401 million in the year-earlier period. The top-line figure disappointed Wall Street. Analysts' consensus call was for quarterly sales of $418.3 million.

Earlier this week, analysts from Piper Jaffray ( PJC) issued an upgrade on Cheesecake share to neutral, from underweight.

In October, Barclays Capital reiterated an equal weight rating on the stock, raising their price target by a dollar to $29.

Elsewhere in the restaurant sector, shares of Chipotle Mexican Grill were upgraded to buy from hold by analysts at Miller Tabak.

The firm also raised its price target on Chipotle shares to $255, from $210.

Chipotle shares added 3.2% to $224.66 ahead of midday.

Stifel Nicolaus analyst Steve West told TheStreet recently that restaurant stocks in the upper-mid-scale casual dining and fast-casual segments are doing well, and should continue to do so in 2011.

That's because more affluent consumers are coming out of the recession at a faster pace than other Americans. That demographic wasn't as hard hit by the economic downturn but curbed their spending anyhow amid low consumer confidence. Now they're spending again, West said, and chains like Chipotle Mexican Grill, Panera Bread ( PNRA), BJ's Restaurants ( BJRI) and Cheesecake Factory are benefiting from the return to consumerism.

Cheesecake said Tuesday that comparable same-store sales at its namesake and Grand Lux Café restaurants increased 0.9% in the recent quarter. Same-store sales, or sales at stores open at least one year, is a closely watched metric in the restaurant industry. Comps grew 1% at Cheesecake Factory restaurants and decreased 0.4% at Grand Lux.

The company said sales were negatively impacted by inclement weather and a holiday shift.

Weather may be a reason for sluggish sales among a number of restaurateurs last quarter as West Coast flooding and the East Coast blizzard kept potential diners out of restaurants.

CEO David Overton boasted that the recent quarter was Cheesecake's fourth consecutive period of growing guest traffic and same-store sales. "As we begin the New Year, we remain comfortable with our expectations for 2011, the planned expansion of our brands and our ability to continue to grow shareholder value in 2011 and beyond," he said.

Cheesecake is expected to formally announced its fourth-quarter results on Feb. 10.

-- Written by Miriam Marcus Reimer in New York.

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