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Noodles & Co. shares fall after forecast

NEW YORK (AP) -- Shares of restaurant chain Noodles & Co. fell Friday after the newly public company issued an underwhelming forecast for the year.

THE SPARK: The company, which debuted on the market this summer, said it expects adjusted net income of 39 cents to 41 cents per share for the full year, up from 31 cents per share in 2012. That brackets analysts' prediction of 40 cents per share, but investors may have expected an even more optimistic outlook from the recent IPO.

The Broomfield, Colo.-based company also said sales at established restaurants are expected to rise 3 percent for the year. That would be a slowdown from the 4.4 percent increase the company reported for its second quarter on Thursday.

THE BIG PICTURE: Noodles & Co. made a strong showing for its initial public offering in June, with its shares more than doubling on their first day of trading. Investors had anticipated the IPO because of the rising popularity of chains such as Chipotle Mexican Grill Inc., which are seen as the next generation of fast-food restaurants where people are willing to pay more for higher quality food.

Noodles launched in 1995 and has more than 300 restaurants in 25 states and Washington, D.C.

For the quarter ended July 2, the company reported adjusted net income of 13 cents per share, 2 cents above Wall Street's estimate, according to FactSet. Revenue rose 18 percent to $89.2 million, beating analysts' prediction by $1 million.

THE ANALYSIS: Despite his confidence in the chain's concept, Stifel analyst Paul Westra said that investors are overvaluing Noodles' growth prospects and that he expects its shares to trade more in line with the market over the next year. Westra has a "Hold" rating and $33 value estimate on the stock.

SHARE ACTION: The stock fell 9 percent to $42.95 in midday trading Friday. Its shares priced at $18 in the IPO and had nearly tripled through Thursday's close.