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Salami, Roast Beef,Turkey, Ham & Swiss Cheese is know as a "Wreck" at Potbelly. Investors may be thinking that this sandwhich is synominous with the stock.

Let's take a look at the recent developments at Potbelly (PBPB - Snapshot Report) and then discuss the outlook for this and a few other Quick Service Restaurant (QSR) names.

PBPB Warns

On July 9, Potbelly warned Wall Street that revenues for the second fiscal quarter of 2014 would be about $83.6M. That is a little below the $86.6M consensus estimate, but that might be the least of the issues right now.

The company expects to report a decrease in company operated comparable store sale of 1.6%. The second quarter will also see an increase in advertising expense of about $0.4M due to the launch of its new Flats platform.

Bonus For Missing?

The thing that stood out to me, and really made me not want to eat at Potbelly's was the idea that management appears to have given themselves a bonus of about $800,000 in the quarter.

The release noted that "public company related expenses are expected to be $0.8 million higher for the quarter versus the same period last year, driven primarily from non-cash stock-based compensation."

This increased expense along with higher advertising expenses could be a hit of approximately $2M, or $0.06 per diluted share.

"Shop" Growth

The company noted that they continue to expect to open "at least one thousand domestic shops" and in the most recent quarter they opened 7 company open shop and one franchise location.

PBPB also anticipates that they will open 40-48 new shops this year with the balance coming mostly in the fourth quarter.

Despite all the new stores, guidance called for flat to negative low single digit comparable same store sales. That means that earnings are going to take a hit.

PBPB now projects that EPS will be between $0.18-$0.21, down from $0.33-$0.35.

The company is slated to report full results on August 5 after the market closes.

PBPB is currrently a Zacks Rank #4 (Sell) and I am short via puts.

Hungry For More

While one research report suggested that there might be some company specific issues at PBPB, there has been other signals of weakness for the QSR stocks.

A discussion we had on Zacks Real Time Insight the other week gave plenty of insight into raw material costs. Cattle prices have done nothing but move higher, while corn is looking at another bumper crop and expected to move lower. Check the comments for more on Lean Hogs as well.

In contrast to the recent performance of PBPB, Buffalo Wild Wings (BWLD - Analyst Report) has seen its shares rise in price lately. Some recent research reports have noted that the World Cup has played a role in drawing more customers into its locations. The chart below shows the steady move higher shares of BWLD have seen over the last two years.

Still investors will want to look into the numbers behind most of the QSR names.

Estimates for PBPB

Given the recent warnings, analysts have slashed numbers for this year and next.

It is one thing to launch a new platform of sandwiches and see less than spectacular results, its another thing to have your earnings estimates cut over a period of two years based on that small expense. Seems the analysts may be thinking that the worst is yet to come.

Valuation

Earnings are a big part of any valuation story, and with estimates dropping as much as they have you would think that PE multiples would have come down as well. I thought that, and I was wrong.

The trailing PE of PBPB for 35x is well ahead of the industry average of 20x, while the forward PE is even harder to swallow. The 66x forward multiple is astonishingly high compared to the 18x industry average. The price to book multiple of 2.3x shows PBPB trading at a slight discount to the industry average of 2.6x, but things get out of whack again when looking at price to sales. The company has a 1.5x PS multiple, while the rest of the industry trades at about 0.5x sales.

Zacks shows a forward PE of 31x for (BWLD - Analyst Report), 21x for (PNRA - Analyst Report) and 20x for (CAKE - Analyst Report), 24x for (RRGB - Analyst Report), and 62x for (NDLS - Snapshot Report).

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Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

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