No Free Lunch, Part II: When a Rising Tide Doesn’t Lift All Boats (Marketwatch)
Regular readers of Eagle Eye Opener received a news brief yesterday noting the rebirth of the business lunch — as well as the rebirth of profits in the companies most-often picked to host these lunches. The rising share prices of Darden Restaurants (DRI) and Yum Brands! (YUM), up 23 % and 14% so far this year, respectively, are examples of this uptick in dining-out demand. Think of today’s first brief as the second half of yesterday’s piece — but in a cautionary vein. Remember, other restaurant chains could be losing business to the winners.
Upscale restaurant chain Ruby Tuesday (RT) reported today that its fiscal first-quarter sales rose 1.6%, reflecting at best a modest participation in the lunch-bunch rebirth. But a closer look at the numbers shows RT’s Q1 earnings tumbling 16% — mainly due to costs associated with a protracted executive search, as well as the need to cut costs and to close down under-performing stores. With restaurant chains, investors need to look beyond the appeal of what is served on a platter and instead delve into the performance numbers to discover the most appetizing choices.
Invisible Recall Shows Some Automakers Back with a Vengeance in 2012 (Reuters)
Yesterday, Toyota Manufacturing Corp. (NYSE: TM) the world’s largest automaker announced a global recall of some 7.4 million cars. As an investor, you might be afraid that a recall of this magnitude would crush the company’s share price. But you’d be wrong. The TM shares dipped yesterday but less than 1.5%. The shares ended the day at $74.50 but they have rebounded today to trade close to $75 in the early afternoon.
In fact, if anything, the Toyota recall actually reinforces the fact that the Japanese-based auto maker, along with a number of its direct competitors, are having very strong years — as reflected in the following year-to-date percentage returns: TM is up 9.91% (despite seeing sales to China fall 48.9% year-on-year in September). General Motors Co. Even bigger increases in share price have occurred at GM), which jumped 17.8%, and Volkswagen (VW), which rose 23%.