RUTH - Ruth's Hospitality drops sharply after Raymond James turns cautious with downgrade

Ruth's Hospitality Group ( NASDAQ: RUTH ) traded sharply lower on Monday after Raymond James cut its rating to Market Perform from Strong Buy amid the inflationary backdrop impacting the sit-down dining restaurant sector

Analyst Brian Vaccaro and team now have a more cautious stance on the margin outlook for Ruth's and to a lesser extent have diminished conservative sales expectations after seeing the  modest deceleration in 3-year comparable sales  trends in recent months.

The Q4 costs of good sold guidance from RUTH was also noted to be much higher than anticipated as beef inflation has returned earlier than the firm had previously expected.

While Ruth's sales are seen having room for further improvement, margins are expected to ultimately recover to at least 2019 levels and the balance sheet is still solid -  the restaurant stock is now seen as fairly valued at a 2023 P/E of ~14.5X.

Shares of RUTH fell 8.90% in early trading on Monday to a six-week low.

Dig into the Ruth's Q3 earnings call transcript.

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