Eat up

After reviewing Applebee's International's (APPB)December sales, we are keeping our fair value estimate unchanged. The grill and bar chain's same-restaurant sales rose 0.2% for the six weeks ending Dec. 31. We're encouraged that Applebee's bounced back from its disappointing performance in the November period, in which comparable sales fell 3.1%. The company did acknowledge that the timing of Christmas Eve and Christmas Day had a positive impact on December sales of about 1%. Nevertheless, we are encouraged by the improving trend.

On the back of this performance, Applebee's now expects its fiscal 2006 diluted earnings per share to be at or slightly above the high end of its previously stated guidance of $1.10-$1.13, excluding impairment charges. The company also reaffirmed its previously stated guidance for fiscal 2007, including diluted earnings per share in the range of $1.15-$1.20, in line with our projections. Applebee's continued to buy back stock, repurchasing 474,600 shares in the fourth quarter at an average price of $23.16 for an aggregate cost of $11 million. We believe this was a smart move, as the stock remains significantly undervalued; we note that the company still has $240 million remaining under its current stock-repurchase authorization.