Fogo de Chao (FOGO - Snapshot Report) owns and operates full-service Brazilian steakhouses in the United States and Brazil. It operates 31 restaurants in the United States, 10 restaurants in Brazil, and 1 joint venture restaurant in Mexico. The stock is the Bear of the Day after being downgraded to a Zacks Rank #5 (Strong Sell) and after poor earnings results last week.
Fogo has a market cap of $350 Million and a Forward PE of 14.74 The stock sports pretty good Zacks Style Scores, with an “B” in Value “B” in Growth, but a “D” in Momentum. However, a miss on EPS and a guidance cut to fiscal year 2016 has the stock trending lower.
The company reported Q2 EPS on August 9thth, with the numbers coming in at $0.22 versus the $0.25 expected. Revenue came in lower than expected at $69.6 Million against the $73.3 Million expected. The company also cut their fiscal year 2016 outlook to $0.85-0.89 verse the $0.94 expected. In addition, revenue and same store sales were guided lower.
CEO Lawrence Johnson had some comments on the quarter: “In today’s softening sales environment, guests are placing greater emphasis on value, customization, variety and speed of service and we believe that our strategies are designed to deliver on these needs.”
Investors weren’t buying the comment that strategies are delivering and have sold the stock down 10% since the report. Analysts aren’t buying the story either and have been cutting estimates.
Over the last 30 days, estimates have been revised lower for all time frames. For fiscal year 2016, the numbers have been taken down 8%, from $0.94 to $0.86. For 2017, estimates are now seen at $0.97, down from $1.11 or 13%.
A Better Option
Denny Corp (DENN - Snapshot Report) is a Zacks Rank #2 (Buy) that operates Denny’s, Hardee’s, Quincy’s and other moderately priced restaurants. The company was founded in 1953, has 8,500 employees and is headquartered in Spartanburg, South Carolina.
Denny’s has a market cap of $800 Million and a Forward PE of 21. The stock sports Zacks Style Scores of “B” in Value, “A” in Growth, and “C” in Momentum.
On August 3rd the company raised adjusted EBITDA for the year, despite the challenging full-service dining environment. Estimates for the company in 2016 have been pretty steady, but are ticking 1.7% higher for fiscal year 2017.
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