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Red Robin Gourmet Burgers, Inc. (
- Analyst Report
, a chain of casual dinning restaurants, recently announced that its board of directors has reauthorized a share repurchase program of up to $50 million worth of its common stock, which is set to conclude at the end of 2012.
The stock buyback would be effective from January 1, 2013, or when the current buyback program concludes, whichever is earlier. The company seeks to execute the program in the open market or in negotiated transactions, depending on the share price and other macro factors.
Moreover, with cash and cash equivalents of $26.9 million as of September 30, 2012, the company has enough cash balance to reward its shareholders. The share repurchase program will also reduce the number of shares outstanding, which stood at 14.5 million as of September 30, 2012.
This restaurant operator remains focused on enhancing shareholder value. In the recently reported quarter, Red Robin repurchased 266,000 shares for $7.9 million. The company has shares worth $32.0 million still available under its current $50 million program, as of September 30, 2012.
One of its competitors, Chipotle Mexican Grill, Inc. ( CMG - Analyst Report ) has also recently announced a share repurchase program of $100 million of its common stock. This comes in addition to the existing $60 million shares available for repurchase under its current buyback program of $100 million. Another peer, Yum! Brands Inc. ( YUM - Analyst Report ) , also recently authorized additional repurchase of up to 1 billion of its common stock, through May 31, 2014.
We appreciate Red Robin’s efforts to bolster long-term shareholders’ value. We believe that the share repurchase authorization affirms the company’s positive outlook and reflects its confidence in its fundamentals. Concurrently, buying back of shares underlines the company’s strategy to increase shareholders’ value in the long run. The announcement is not only expected to reinforce shareholders’ confidence but also boost the market value of the outstanding shares.
The company reported third-quarter 2012 results above the Zacks Consensus Estimate, driven by top-line growth and margin expansion. The company’s Project RED which focuses on revenue growth, expense control and capital deployment continues to drive its performance. In addition, Red Robin’s focus on menu innovation, unit growth, store remodeling, and investments to improve operational efficiency also augurs well for its earnings. However, commodity cost pressure; lower consumer spending and cut-throat competition related to price remain headwinds
Red Robin, currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We are also maintaining our long-term ‘Neutral’ recommendation on the stock.
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