It has been about a month since the last earnings report for Red Robin (RRGB - Free Report) . Shares have added about 27.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Red Robin due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Red Robin Q2 Earnings Miss Estimates, Decline Y/Y
Red Robin reported second-quarter fiscal 2020 results, wherein the bottom line missed the Zacks Consensus Estimate while revenues beat the same. However, the top and the bottom line declined on a year-over-year basis.
The company reported adjusted loss per share of $3.31, wider than the Zacks Consensus Estimate of a loss of $2.97. In the year-ago quarter, the company had reported adjusted earnings of $1.03.
Quarterly revenues of $160.1 million surpassed the consensus mark of $159.8 million by 1%. However, the top line declined 47.7% year over year due to limited dining room capacity operations at re-opened restaurants and operating off-premise only at restaurants with closed dining rooms, resulting in lower sales of beverages and burgers.
Comparable restaurant revenues declined 41.4% year over year owing to a 38.5% fall in guest count and a 2.9% decrease in average guest check. The decline in average guest check can be attributed to a 5.7% fall in menu mix, partially offset by a 2.2% increase in pricing and 0.6% rise owing to lower discounting. Guest count in the quarter was hurt by a decline of 36.2% owing to the pandemic.
Restaurant-level operating profit margin came in at 2% for the fiscal second quarter compared with 18.2% in the year-ago period.
Restaurant labor costs (as a percentage of restaurant revenue) rose 400 basis points (bps) year over year to 39.2% in the fiscal second quarter. The increase was primarily driven by sales deleverage and higher wage rates, partially offset by lower restaurant manager incentive compensation.
Other restaurant operating costs increased 730 bps year over year to 21.6%. The increase was primarily driven by rise in third-party delivery fees owing to higher off-premise sales volumes and sales deleverage impacts on restaurant supply, utility, and technology costs. However, this was partially offset by a decrease in restaurant maintenance costs.
Cost of sales rose 30 bps year over year to 24.2%. The increase was primarily attributed to rise in beef prices, partially offset by discounts and lower waste. Occupancy costs increased 460 bps year over year to 13% due to sales deleverage impacts on rent expenses and other real estate costs.
Adjusted earnings before interest, taxes and amortization came in at ($15.3) million against earnings of $25.5 million reported in the year-ago quarter.
Other Financial Information
As of Jul 12, 2020, the company had cash and cash equivalents of $26.1 million compared with $30 million at the end of Dec 29, 2019. Inventories in the reported quarter declined 5.5% to $24.9 million. As of Jul 12, 2020, its long-term debt was $197.8 million compared with $206.9 million as on Dec 29, 2019.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 12.6% due to these changes.
At this time, Red Robin has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Red Robin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.