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Red Robin (RRGB) Falls on Q3 Earnings Miss, Downbeat View

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Shares of Red Robin Gourmet Burgers Inc. (RRGB - Free Report) tanked nearly 19% in after-hours trading on Nov 6, after the company reported lower-than-expected third-quarter 2017 results and lowered its profit outlook for the year.

Earnings & Revenue Discussion

Red Robin’s adjusted earnings of 21 cents per share lagged the Zacks Consensus Estimate of 27 cents by 22.2% and declined 44.7% year over year.

Revenues of $304.2 million came below the Zacks Consensus Estimate of $308.1 million by over 1% but increased 2.3% year over year. This improvement was driven primarily by new restaurant openings.

Behind the Headline Numbers

Company-owned restaurants comps decreased 0.1% year over year, as against the prior-quarter comps increase of 0.5%. The downturn was led by a 0.1% decline in average guest check and flat guest counts. Notably, the decrease in average guest check comprised a 1.6% drop in menu mix, partly offset by a 1.5% increase in pricing.

Restaurant-level operating profit margin decreased 120 basis points (bps) to 17.4% due to rise in occupancy costs, higher cost of sales, elevated labor costs and increase in other restaurant operating expenses.

Adjusted earnings before interest, taxes, and amortization (EBITDA) decreased 4.9% to $25.5 million from $26.8 million in the year-ago quarter.

Fourth-Quarter View

For the fourth quarter, earnings per share are estimated between 45 cents and 60 cents. Meanwhile, the Zacks Consensus Estimate of 99 cents is pegged much higher than the guided range.

Guidance for 2017

For 2017, Red Robin now anticipates adjusted earnings in the band of $2.16-$2.31 per share. Previously, the company projected the same to fall in the low end of the $2.80-$3.10 per share range. The Zacks Consensus Estimate for 2017 is pegged at $2.78.

Red Robin projects comparable restaurant revenues to be flat to up 0.5% compared with the rise in the band of 0.5-1.5%, anticipated earlier.

Cost of sales, as a percentage of restaurant revenues, is projected to be in the range of down 25 bps to up 25 bps in 2017 compared with 2016, owing to the impact of higher beef prices in the second half of the current year.

Restaurant labor costs, as a percentage of restaurant revenues, are expected to be up 50 bps year over year.

Red Robin has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise

 

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise | Red Robin Gourmet Burgers, Inc. Quote

Peer Releases

McDonald's Corp. (MCD - Free Report) reported third-quarter adjusted earnings per share of $1.76, beating the Zacks Consensus Estimate of $1.75 by 0.6%. Earnings also increased 9% year over year, given stronger operating performance and G&A savings.

Darden Restaurants, Inc.’s (DRI - Free Report) first-quarter fiscal 2018 adjusted earnings of 99 cents per share outpaced the Zacks Consensus Estimate of 98 cents by over 1%. Further, the bottom line increased 12.5% year over year on the back of higher revenues.

Chipotle Mexican Grill, Inc.’s (CMG - Free Report) third-quarter 2017 adjusted earnings of $1.33 per share lagged the Zacks Consensus Estimate of $1.56 by 14.7%.

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