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Chuy's Holdings, Inc. (CHUY - Free Report) took a hit from Hurricanes Harvey and Irma and higher labor costs in the third quarter. This Zacks Rank #5 (Strong Sell) is expected to see a 10% decline in earnings this year.
Chuy's is a Texas-based Tex-Mex restaurant chain. It operates 88 full-service restaurants across 19 states where each location offers a unique "unchained" look and feel.
An Earnings Miss in the Third Quarter
On Nov 2, Chuy's reported third quarter results which missed the Zacks Consensus by 3 cents. Earnings were $0.19 versus the consensus of $0.22.
It was the company's first earnings miss since 2014.
Revenue rose 7.7% to $92.2 million from $85.6 million in the year ago period, but was hit by Hurricanes Harvey and Irma to the tune of about $1.2 million. Chuy's is headquartered in Austin, Texas and has a lot of Texas locations.
Comparable restaurant sales, which is the key metric for the industry, fell 2.1% year-over-year. The hurricanes impacted that number negatively by about 90 basis points, so it still would have been in the negative, even without the hurricanes.
Comps fell due to a 3.7% decrease in the average weekly customers offset by a 1.6% increase in average check.
However, it did see some improvement in comps in September and they were "slightly positive to date through the month of October."
Total restaurant operating costs as a percentage of revenue rose to 84.1% from 81% in the prior year due to decreased sales from the hurricanes as well as higher labor costs due to hourly labor rate inflation, increases in repairs and maintenance and insurance costs and unfavorable commodity pricing.
Chuy's continued to expand, opening 2 new restaurants in the third quarter and expects to open up 2 new restaurants in the fourth quarter for a total of 11 new restaurants in 2017. It will continue to expand in 2018, with 8 to 12 sites on the docket.
Lowered Full Year Guidance
Like the entire restaurant industry, Chuy's cited the "challenging" environment in its earnings report.
It lowered its full year earnings guidance to the range of $0.96 to $1.00 from its previous range of $1.04 to $1.08.
As a result, 6 analysts cut estimates which lowered the Zacks Consensus to $0.97 from $1.04. That's at the low end of the company's new guidance range.
It's also an earnings decline of 10% as Chuy's made $1.08 in 2016.
The analysts are pessimistic on 2018 as well as 5 estimates were also lowered over the last week. That pushed the Zacks Consensus down to $1.07 from $1.12.
Are Shares a Value?
Shares are down 30% year-to-date but are up off their September lows.
Still, the shares aren't all that cheap. They trade with a forward P/E of 23.
Investors who want to be in the restaurant industry may want to consider the King of the Restaurant chains, Domino's (DPZ - Free Report) . It has the best comps in the industry and is expected to grow earnings by 34% this year and another 19% in 2018.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Image: Bigstock
Bear of the Day: Chuy's (CHUY)
Chuy's Holdings, Inc. (CHUY - Free Report) took a hit from Hurricanes Harvey and Irma and higher labor costs in the third quarter. This Zacks Rank #5 (Strong Sell) is expected to see a 10% decline in earnings this year.
Chuy's is a Texas-based Tex-Mex restaurant chain. It operates 88 full-service restaurants across 19 states where each location offers a unique "unchained" look and feel.
An Earnings Miss in the Third Quarter
On Nov 2, Chuy's reported third quarter results which missed the Zacks Consensus by 3 cents. Earnings were $0.19 versus the consensus of $0.22.
It was the company's first earnings miss since 2014.
Revenue rose 7.7% to $92.2 million from $85.6 million in the year ago period, but was hit by Hurricanes Harvey and Irma to the tune of about $1.2 million. Chuy's is headquartered in Austin, Texas and has a lot of Texas locations.
Comparable restaurant sales, which is the key metric for the industry, fell 2.1% year-over-year. The hurricanes impacted that number negatively by about 90 basis points, so it still would have been in the negative, even without the hurricanes.
Comps fell due to a 3.7% decrease in the average weekly customers offset by a 1.6% increase in average check.
However, it did see some improvement in comps in September and they were "slightly positive to date through the month of October."
Total restaurant operating costs as a percentage of revenue rose to 84.1% from 81% in the prior year due to decreased sales from the hurricanes as well as higher labor costs due to hourly labor rate inflation, increases in repairs and maintenance and insurance costs and unfavorable commodity pricing.
Chuy's continued to expand, opening 2 new restaurants in the third quarter and expects to open up 2 new restaurants in the fourth quarter for a total of 11 new restaurants in 2017. It will continue to expand in 2018, with 8 to 12 sites on the docket.
Lowered Full Year Guidance
Like the entire restaurant industry, Chuy's cited the "challenging" environment in its earnings report.
It lowered its full year earnings guidance to the range of $0.96 to $1.00 from its previous range of $1.04 to $1.08.
As a result, 6 analysts cut estimates which lowered the Zacks Consensus to $0.97 from $1.04. That's at the low end of the company's new guidance range.
It's also an earnings decline of 10% as Chuy's made $1.08 in 2016.
The analysts are pessimistic on 2018 as well as 5 estimates were also lowered over the last week. That pushed the Zacks Consensus down to $1.07 from $1.12.
Are Shares a Value?
Shares are down 30% year-to-date but are up off their September lows.
Still, the shares aren't all that cheap. They trade with a forward P/E of 23.
Investors who want to be in the restaurant industry may want to consider the King of the Restaurant chains, Domino's (DPZ - Free Report) . It has the best comps in the industry and is expected to grow earnings by 34% this year and another 19% in 2018.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>