Earnings wrap: O'Charley's, HealthSpring

Shares of both locals higher as one manages costs, the other blows away estimates

Email | Print By Geert De Lombaerde

Restaurant chain O'Charley's this morning reported a small third-quarter loss in line with analysts' expectations. Sales fell about 7 percent to $194 million.

The Nashville-based company lost $2.1 million in the three months ended Oct. 4, which equates to 10 cents per diluted share. A year ago, it posted a loss of almost $67 million, more than two-thirds of which was due to a goodwill impairment charge.

Same-store sales at the company's O'Charley's and Ninety Nine brands fell about 7 percent from a year ago. The drop at Stoney River, however, was 17 percent. Cost controls helped boost restaurant margins by 60 basis points to 14.2 percent.

"We did not see signs of sequential improvement in consumer restaurant spending as the quarter progressed," President and CEO Jeff Warne said. But with costs now relatively fixed, he added, "driving sales remains the primary focus of our team."

Warne affirmed his company's fourth-quarter forecasts but did not issue a preliminary 2010 range, saying the economic picture remains too murky. Shares of O'Charley's (Ticker: CHUX) were up almost 4 percent in pre-market trading.

HealthSpring investors also are in for a good day after the Medicare Advantage insurer reported strong Q3 numbers and raised its guidance.

The Franklin-based company posted profits of $42.3 million last quarter, up 44 percent from a year ago. Per diluted share, earnings were 77 cents, a good 14 cents higher than the Street's consensus.

Revenues rose 25 percent to almost $660 million, helped in part by a 2.4 percent rise in the number of people enrolled in HealthSpring plans. And while medical expenses rose 26 percent, the ratio of operating costs to revenue fell by more than 1 percentage point.

"Performance in the quarter was driven by improvement in inpatient admissions in most of our markets that more than offset any higher trends we continue to experience in outpatient and professional costs," said Chairman and CEO Herb Fritch.

Fritch, who also raised his full-year guidance, also hinted that 2010 will be a strong year, saying his company the things his team has focused on in 2009 "position us well for a strong 2010 open enrollment season."

Shares of HealthSpring (Ticker: HS) were up almost 20 percent in early trading to $14.72. That puts them within reach of their highest level since late February.