CKE Restaurants shares fall on downgrade

NEW YORK—Shares of CKE Restaurants Inc., which operates the Carl's Jr. and Hardee's fast food chains, dropped Thursday after a Wedbush Morgan Securities analyst cut his rating on the stock.

Shares fell 79 cents, or 6 percent, to $12.36 in afternoon trading.

Analyst Brian Moore lowered his rating to "Hold" from "Buy," saying that the stock has moved to within 10 percent of his target price of $14.

On Wednesday, the company said its blended same-store sales rose 3 percent for the month ended Aug. 11 and 3.6 percent for the second quarter. The chain also said its food costs will likely be 40 to 50 basis points higher than in the year-ago quarter.

But Moore said in a note to investors that cost estimate may not be high enough with energy and other costs escalating "causing us to question the sustainability of margin expansion given higher than expected commodity costs."

High costs for food have taken a bite out of profits at many restaurant companies, particularly for those that need meat and chicken. Big year-over-year increases in the cost of grain have trickled down into the protein market since grain is used to make animal feed. Most restaurants, including CKE, have had to raise menu prices to offset the higher costs.