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Red Robin (RRGB) Up 11.5% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Red Robin (RRGB - Free Report) . Shares have added about 11.5% 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 Q4 Earnings & Revenues Miss Estimates
Red Robin reported weak fourth-quarter fiscal 2020 results, wherein both earnings and revenues missed the Zacks Consensus Estimate after beating the same in the preceding quarter.
The company reported adjusted loss per share of $1.79 in the quarter under review, wider than the Zacks Consensus Estimate of a loss of $1.29. In the year-ago quarter, the company had reported adjusted loss of 36 cents.
Paul J. B. Murphy III, Red Robin’s president and CEO, said, “There is no doubt that increased dining restrictions during the fourth quarter in California, Colorado, Oregon, and Washington had a significant, negative impact to our topline momentum. However, we are bullish as we look to the future reopening of these markets, which represented almost 40% of our 2019 restaurant sales.”
Revenue Discussion
Quarterly revenues of $201.1 million lagged the consensus mark of $205 million. Moreover, the top line declined 33.6% year over year on account of limited dining room capacity operations at re-opened restaurants due to the coronavirus pandemic.
Comparable restaurant revenues slumped 29% year over year on account of a decline of 28.8% and 0.2% in guest count and average guest check, respectively. The decline in average guest check can be attributed to a 2.9% fall in menu mix and 0.3% increase in discounts, partially offset by a 3% increase in pricing.
Operating Results
Restaurant-level operating profit margin came in at 6.2% for the fiscal fourth quarter compared with 18.9% in the year-ago period.
Restaurant labor costs (as a percentage of restaurant revenue) rose 500 basis points (bps) year over year to 39.5% in the fiscal fourth quarter. The increase was primarily driven by sales deleverage and higher wage rates. Other restaurant operating costs increased 380 bps year over year to 19.1%.
Cost of sales declined 90 bps year over year to 22.1%. Occupancy costs increased 290 bps year over year to 11.8% due to sales deleverage.
Adjusted earnings before interest, taxes and amortization was ($6.4) million against earnings of $26.7million reported in the year-ago quarter.
Other Financial Information
As of Dec 27, 2020, the company had cash and cash equivalents of $16.1 million compared with $30 million at the end of Dec 29, 2019. Inventories in the reported quarter declined 9.9% to $23.8 million. As of Dec 27, 2020, its long-term debt was $161 million compared with $206.9 million as on Dec 29, 2019.
Guidance
The company provided limited guidance due to the coronavirus pandemic. Management announced that rise in casual dining demand, higher average guest check and robust off-premise sales will in Western markets will drive the company’s comparable restaurant revenues in fiscal 2021.
It further added that mixture of enterprise pricing, outdoor seating capacity expansions, restoration of full operating hours, and Donatos expansion will drive comparable restaurant sales growth in the range of mid-to-high single digit. Red Robin anticipates capital expenditure in the range of $45 million to $55 million.
Other Information
Red Robin announced that Donatos will generate annual company pizza sales of more than $60 million and profitability in an excess of $25 million by 2023. In 2021, the company is likely to add Donatos to nearly 120 restaurants.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 35.91% due to these changes.
VGM Scores
Currently, Red Robin has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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.
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Red Robin (RRGB) Up 11.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Red Robin (RRGB - Free Report) . Shares have added about 11.5% 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 Q4 Earnings & Revenues Miss Estimates
Red Robin reported weak fourth-quarter fiscal 2020 results, wherein both earnings and revenues missed the Zacks Consensus Estimate after beating the same in the preceding quarter.
The company reported adjusted loss per share of $1.79 in the quarter under review, wider than the Zacks Consensus Estimate of a loss of $1.29. In the year-ago quarter, the company had reported adjusted loss of 36 cents.
Paul J. B. Murphy III, Red Robin’s president and CEO, said, “There is no doubt that increased dining restrictions during the fourth quarter in California, Colorado, Oregon, and Washington had a significant, negative impact to our topline momentum. However, we are bullish as we look to the future reopening of these markets, which represented almost 40% of our 2019 restaurant sales.”
Revenue Discussion
Quarterly revenues of $201.1 million lagged the consensus mark of $205 million. Moreover, the top line declined 33.6% year over year on account of limited dining room capacity operations at re-opened restaurants due to the coronavirus pandemic.
Comparable restaurant revenues slumped 29% year over year on account of a decline of 28.8% and 0.2% in guest count and average guest check, respectively. The decline in average guest check can be attributed to a 2.9% fall in menu mix and 0.3% increase in discounts, partially offset by a 3% increase in pricing.
Operating Results
Restaurant-level operating profit margin came in at 6.2% for the fiscal fourth quarter compared with 18.9% in the year-ago period.
Restaurant labor costs (as a percentage of restaurant revenue) rose 500 basis points (bps) year over year to 39.5% in the fiscal fourth quarter. The increase was primarily driven by sales deleverage and higher wage rates. Other restaurant operating costs increased 380 bps year over year to 19.1%.
Cost of sales declined 90 bps year over year to 22.1%. Occupancy costs increased 290 bps year over year to 11.8% due to sales deleverage.
Adjusted earnings before interest, taxes and amortization was ($6.4) million against earnings of $26.7million reported in the year-ago quarter.
Other Financial Information
As of Dec 27, 2020, the company had cash and cash equivalents of $16.1 million compared with $30 million at the end of Dec 29, 2019. Inventories in the reported quarter declined 9.9% to $23.8 million. As of Dec 27, 2020, its long-term debt was $161 million compared with $206.9 million as on Dec 29, 2019.
Guidance
The company provided limited guidance due to the coronavirus pandemic. Management announced that rise in casual dining demand, higher average guest check and robust off-premise sales will in Western markets will drive the company’s comparable restaurant revenues in fiscal 2021.
It further added that mixture of enterprise pricing, outdoor seating capacity expansions, restoration of full operating hours, and Donatos expansion will drive comparable restaurant sales growth in the range of mid-to-high single digit. Red Robin anticipates capital expenditure in the range of $45 million to $55 million.
Other Information
Red Robin announced that Donatos will generate annual company pizza sales of more than $60 million and profitability in an excess of $25 million by 2023. In 2021, the company is likely to add Donatos to nearly 120 restaurants.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 35.91% due to these changes.
VGM Scores
Currently, Red Robin has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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.