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GrubHub (GRUB) Down 18.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for GrubHub (GRUB - Free Report) . Shares have lost about 18.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is GrubHub due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Grubhub Q4 Earnings Miss Estimates, Revenues Up Y/Y

Grubhub reported a loss of 41 cents per share in fourth-quarter 2020, which came in much wider than the year-ago loss of 5 cents per share. Markedly, the Zacks Consensus Estimate for earnings was pegged at 5 cents per share.

The company reported net loss per order of $1.12 in the fourth quarter, wider than the year-ago quarter’s net loss per order of 60 cents.

Revenues surged 47.6% year over year to $503.7 million, beating the consensus mark by 1.8%.

The company’s capture rate, net revenues divided by gross food sales, remained flat sequentially at 21%.

Markedly, in June 2020, Grubhub announced its acquisition by Just Eat Takeaway.com that will create the largest and the only profitable online food marketplace outside of China. Due to the pending acquisition, the company didn’t issue any forward-looking guidance.

Operating Details

Total costs & expenses flared up 47.8% year over year to $541.1 million. Operations & support; sales & marketing; technology; and general & administrative expenses soared 67.7%, 39.3%, 5.1% and 20.9%, respectively.

Notably, Grubhub continues to support its restaurant partners to help them counter the pandemic-induced disruptions, by reducing commissions, increasing marketing spend, providing winterization grants, along with free digital ordering tools.

Adjusted EBITDA climbed 16.9% from the year-ago quarter to $31.2 million. Adjusted EBITDA per order was 52 cents, decreasing from the year-ago quarter’s 58 cents and the previous quarter’s 71 cents.

Revenues excluding operations and support costs were $3.05 per order, up from the last quarter’s $2.89.

Gross Food Sales & Active Diners See a Spike

Gross Food Sales (GFS) jumped 52.1% year over year to $2.4 billion. Average order size increased 16% year over year to $39.

The solid uptake in GFS was primarily driven by robust new diner-base and restaurant additions, along with higher order frequency from existing diners.

Active diners were 31.4 million, up 38.9% year over year. The company added 1.5 million net new active diners sequentially.

Daily Average Grubs (DAGs) were 658,100, up 30.9% year over year, aided by strong adoption of online food ordering.

Grubhub now has more than 300K restaurants on its platform, including 265K restaurant partners. The expanding partner base is expected to help the company rapidly penetrate the growing food take-out market in the United States.

Balance Sheet

As of Dec 31, 2020, cash and cash equivalents (including short-term investments) were $413.4 million compared with $466.8 million as of Sep 30, 2020.

Long-term debt as of Dec 31, 2020, was $494.1 million compared with $493.9 million as of Sep 30.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.15% due to these changes.

VGM Scores

Currently, GrubHub has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, GrubHub has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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