For Immediate Release
Chicago, IL – November 21, 2017 – Zacks Equity Research highlights Weight Watchers International, Inc. (WTW - Free Report) as the Bull of the Day and Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Palo Alto Networks (PANW - Free Report) , Urban Outfitters (URBN - Free Report) and Intuit Inc. (INTU - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Weight Watchers International, Inc. has used the power of Oprah to turn the company around. This Zacks Rank #1 (Strong Buy) with earnings expected to soar 65% in 2017.
Weight Watchers provides weight management services through Company-owned and franchise operations as well as digital weight management products through its websites, mobile sties and apps.
In October 2015, as the company struggled to adjust to online competition, Oprah Winfrey bought a 10% stake, with the option to buy 5% more, and was given a seat on the Board of Directors.
Additionally, the billionaire entrepreneur, actress and media guru, became a spokesperson for the product.
In the 2-years since, it has been a bumpy road, but in 2017, Weight Watchers has clearly found the secret sauce as sales have turned around.
Another Beat in the Third Quarter
On Nov 6, Weight Watchers reported its third quarter results and beat the Zacks Consensus for the 5th straight quarter.
Earnings were $0.65 compared to the consensus of just $0.48.
Revenue jumped 15% to $324 million as total paid weeks in the quarter soared 20% year-over-year.
What's remarkable about its recent quarters is that it is seeing this growth outside of the usual "peak diet" quarter which occurs in January with New Year's resolutions. Prior to 2017, the business had been much more cyclical.
Raised Full Year Guidance Again
Once again, the company raised full year guidance, this time to a range of $1.77 to $1.83 from its prior guidance of $1.57 to $1.67.
In response, the Zacks Consensus Estimate rose to $1.60 from $1.45, which is earnings growth of about 65% as the company only made $0.97 last year.
The estimates for 2018 are also on the rise, jumping to $1.90 from $1.75 in the last 30 days. That's another 19% earnings growth.
Too Much Debt?
However, while annual revenue is now growing in the double digits, Weight Watchers has $1.930.4 million outstanding consisting entirely of Tranche B-2 Term Loans.
On Nov 13, Weight Watchers announced that it would offer $500 million in aggregate principal amount of senior notes due 2025 in a private offering.
It intends to use the net proceeds and cash on hand to repay all amounts outstanding under its existing credit facilities and terminate those facilities.
It will also enter into a new $150 million revolving credit facility to refinance its existing $50 million revolving credit facility.
Shares fell on the news.
Is the Rally Over?
Shares of Weight Watchers have been one of the hottest stocks on the Street in 2017.
Year-to-date, they're up 303%. After beating on earnings again, shares hit new highs but the announcement of the notes sent them lower.
Weight Watchers is now trading with a forward P/E of 30.6.
But it has the growth to support the valuation and it's entering its hottest quarter of the year with a lot of momentum.
For investors looking for a stock in the hot wellness and health food area, Weight Watchers is one to keep on the short list.
Bear of the Day:
Red Robin Gourmet Burgers, Inc. is getting hit by the challenging dine-in restaurant environment and higher labor costs. This Zacks Rank #5 (Strong Sell) recently lowered full year EPS guidance.
Red Robin operates a casual dining restaurant chain of more than 560 restaurants in the United States and Canada that specializes in high-quality burgers and Bottomless Steak Fries. It offers a wide variety of salads, soups, appetizers and entrees along with signature beverages including its extensive selection of local and regional beers.
Third Quarter Miss
On Nov 6, Red Robin reported its third quarter results and missed on the Zacks Consensus Estimate. Earnings were $0.21 versus the consensus of $0.27.
Comparable restaurant revenue, a key metric in the industry, fell 0.1% year-over-year due to a 0.1% decrease in the average guest check and flat guest counts.
Like everyone else in the industry, Red Robin is being hit by rising labor costs.
Guided Lower for the Full Year
Given the pressures in the industry, especially in the dine-in category, Red Robin lowered its full year EPS guidance to a range of $2.16-$2.31 from $2.80-$3.10.
It also lowered its comparable restaurant sales outlook to flat to up 0.5%.
Additionally, while it is expected to move forward with its planned 9 store openings in 2018, it's going to pause store openings going forward to reassess its service model.
Trying a New Model
Along those lines, on Nov 13, the company announced it was going to test a first-of-its-kind, delivery-only concept in downtown Chicago on North Michigan Avenue.
It won't have a traditional storefront but it will have the same signature menu and catering services.
All orders placed in downtown Chicago will be self-delivered by Red Robin Express but also will offer third-party delivery through Amazon and Door Dash.
Is delivery the wave of the future, even for the casual dining chains? Stay tuned.
2017 and 2018 Estimates Lowered
For now, the analysts are bearish on the outlook.
Given the guidance cut, it's not surprising that 6 estimates were lowered for 2017 in the last 30 days which pushed the Zacks Consensus down to $2.35 from $2.78.
That's a decline of 15.6% from 2016's earnings of $2.78.
But analysts also cut 2018, with 6 estimates lowered in the last 30 days to $2.71 from $3.28.
Shares Fall But Are They Cheap?
Shares fell on the guidance cut and are now down 11% year-to-date.
But Red Robin shares aren't cheap. They trade with a forward P/E of 20.8.
Palo Alto Networks, Urban Outfitters, Intuit All Beat Expectations
Next-generation security company Palo Alto Networks surprised to the upside on both top and bottom lines after the closing bell today. The company's fiscal Q1 2018 earnings per share reached 74 cents, better than the Zacks consensus estimate of 68 cents per share, as well as 34.5% higher than the year-ago quarter. Revenues in the quarter of $505.5 million easily topped the $488.4 million expected, up 27% year over year.
Guidance for both 2nd quarter full fiscal year 2018 were ratcheted up, as well: quarterly guidance of 78-80 cents per share is above the 77 cent Zacks consensus, and the full-year range of $3.35-3.41 per share tops the $3.27 per share we had been looking for.
Also, Palo Alto Networks has finally announced its new CFO to replace the retiring Steffan Tomlinson: Kathy Bonnano, an in-house financial planning executive who has been with the company since 2014. In her remarks, Bonnano called Palo Alto "the market disruptor, [with] a unique opportunity to continue to take share at scale."
All told, this is a fine quarter for the Zacks Rank #3 (Hold) company, whose shares rose in the after-market immediately upon the earnings release. PANW is currently trading up close to 7% in late trading. The company's stock suffered a huge drop back in early March of this year, but has gained roughly 17.5% year to date.
Palo Alto Networks was also named one of the Top Stock Picks for the Week of November 20th.
Urban Outfitters also beat expectations on both top and bottom lines after the closing bell today, putting up 41 cents per share on an all-time record $893 million in sales. These outpaced expectations of 33 cents and $857.5 million, respectively. Even after shares had been climbing more than 11% over the last week, URBN is up another 2% in late Monday trading. For more on URBN's Q3 earnings, click here.
Finally, electronic finance firm Intuit Inc. outperformed expectations on top and bottom lines, posting 11 cents per share which beat the Zacks consensus by 6 cents, where revenues of $886 million topped our $856 million expected. For more on INTU's earnings, click here.
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About the Bull and Bear of the Day
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