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Here's Why Grubhub is Slumping After Earnings

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On Wednesday, shares of online food ordering and delivery service Grubhub Inc. are slumping, down about 2.8% in late-morning trading after the company reported disappointing fourth-quarter fiscal 2016 earnings results.

Earnings per share of 19 cents missed the Zacks Consensus Estimate of 20 cents per share, and this is the biggest reason for GRUB’s drop today. Investors should note this number excludes three cents from non-recurring items. Revenues of $137.5 million matched the Zacks Consensus Estimate of $137 million and increased 38% year-over-year. Non-GAAP adjusted EBITDA came in at $39.2 million, a 46% year-over-year increase from the prior-year period.

Among its key business metrics, the Chicago-based company noted that orders, or Daily Average Grubs, grew 21% year-over-year while Active Diners were 8.17 million, a 21% increase from the year-ago period. Gross Food Sales were $818 million, which grew 27% year-over-year.

"Grubhub had a transformative year in 2016. We dramatically improved our product and reaccelerated order growth. Fueled by data-driven product enhancements, substantial strides in delivery, and a refreshed marketing approach, we exited the year growing DAGs faster than we did a year ago," said Matt Maloney, Grubhub CEO.

Grubhub signed Denny's (DENN - Free Report) , Einstein Bros. Bagels, Red Robin Gourmet Burgers (RRGB - Free Report) , and Hooters as corporate delivery customers in the fourth quarter, Maloney also said. The company is now operating in 70 markets, a good sign of growth as Grubhub continues to face competition from other companies like Postmates, Uber, and Amazon (AMZN - Free Report) .

Looking ahead to fiscal 2017, Grubhub expects revenues in the range of $620 million to $660 million and adjusted EBITDA in the range of $165 million to $190 million.

Currently, GRUB is a #4 (Sell) on the Zacks Rank, and is up 9.81% year-to-date.

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