) to outperform.
Analyst Bryan Elliott says fourth quarter earnings per share were in line with his and consensus estimates. He says his downgrade is based solely on valuation. He notes the company is trading at 15 times his $1.70 2003 earnings per share estimate vs. the previous $1.68; peers are trading at 12.9 times to 13.9 times the 2003 price-earnings.
Elliott thinks Applebee's is undervalued on an absolute basis, but is no longer compellingly valued based on comparables. Concerning earnings, he says the slightly higher-than-expected fourth quarter store-level cash flow was offset by higher general and administrative costs, and lower income from other areas. He adds that the tax rate was 75 basis points lower than expected, making operating earnings per share a bit light. Elliott has a $34 target.