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Red Robin Gourmet (RRGB) Down 7.6% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) . Shares have lost about 7.6% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 Tops Q1 Earnings & Revenue Estimates

Red Robin reported better-than-expected first-quarter 2017 results with both earnings and revenues surpassing the Zacks Consensus Estimate..

Earnings & Revenue Discussion

Red Robin’s adjusted earnings of $0.89 per share surpassed the Zacks Consensus Estimate of $0.58 by 53.4%. However, earnings declined 29.9% year over year, owing to lower comps and margins.

Revenues of $418.6 million came above the Zacks Consensus Estimate of $416.7 million by 0.4% and grew 4.1% year over year driven by higher restaurant revenues, somewhat offset by lower franchise royalties, fees and other revenues.

Behind the Headline Numbers

During the quarter, Red Robin’s restaurant revenues went up 4.2% year over year to $413.4 million on the back of new restaurant openings and acquisitions, somewhat offset by lower comps and closed restaurants. Franchise royalties and fee revenues, however, decreased 4.7% to about $5.1 million due to the loss of royalties from 13 franchised restaurants acquired during the first quarter of 2016.

Company-owned restaurants’ comps declined 1.2% year over year, better than the prior-quarter comps decline of 4.3%. The decrease was led by a 1.7% decline in traffic, partially offset by a 0.5% rise in average guest check.

Despite lower cost of sales and occupancy costs, restaurant-level operating profit margin decreased 180 basis points (bps) to 20.7%, due to higher labor costs and other restaurant operating expenses.

Adjusted earnings before interest, taxes, and amortization (EBITDA) decreased 6.3% to $45.8 million from $48.9 million in the year-ago quarter.

Guidance for 2017

For full-year 2017, Red Robin anticipates earnings in the band of $2.80 to $3.10 per share, up from the earlier guided range of $2.70 to $3.00. The Zacks Consensus Estimate for 2017 is pegged at $2.74.

Red Robin expects total revenue growth in 2017 to be between 6% and 8%. This includes comparable restaurant revenue growth in the range of 0.5% to 1.5%. Additionally, the growth is expected to be driven by increased operating weeks associated with locations opened in 2016 and 2017, as well as the 53rd week in 2017.

Adjusted EBITDA in 2017 is likely to be in between $145 million and $155 million.

Capital expenditures are expected to be roughly between $85 million and $95 million.

Meanwhile, the company plans to open roughly 17 and close nine Red Robin locations in 2017.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to four lower. In the past month, the consensus estimate has shifted down by 14.2% due to these changes.

Red Robin Gourmet Burgers, Inc. Price and Consensus

 

VGM Scores

At this time, the stock has a nice Growth Score of 'B', though it is lagging a bit on the momentum front with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.

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

Based on our scores, the stock is more suitable for value and growth investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  Interestingly, the stock sports a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.


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