Shares of Red Robin Gourmet Burgers Inc. (RRGB - Free Report) gained 2.3% in after-hours trading on Feb 22, after the company reported better-than-expected results in the fourth quarter of 2017.
Earnings & Revenue Discussion
Red Robin’s adjusted earnings of 78 cents per share surpassed the Zacks Consensus Estimate of 55 cents by 41.8% and jumped a significant 122.9% year over year.
Revenues of $342.4 million beat the Zacks Consensus Estimate of $331 million by more than 3.4% and increased 17.5% from the prior-year quarter. This improvement was driven primarily by new restaurant openings.
Behind the Headline Numbers
Comps at company-owned restaurants increased 2.7% year over year, against the prior-quarter comps decrease of 0.1%. The upside was led by 0.8% growth in average guest check and 1.9% increase in guest counts. Notably, the increase in average guest check comprised a 2.6% increase in pricing, partly offset by 1.8% drop in menu mix. Red Robin outperformed the casual dining industry on guest traffic for the sixth consecutive quarter.
Restaurant-level operating profit margin expanded 70 basis points (bps) to 20.5% due to a 100-bps decrease in labor costs, 50-bps drop in other restaurant operating expenses and 20-bps fall in occupancy costs. The improvement was partly offset by a 90-bps increase in cost of sales.
Adjusted earnings before interest, taxes, and amortization (EBITDA) increased 22.8% to $35.8 million from $29.2 million in the year-ago quarter.
Revenues came in at $1.4 billion, up 6.5% from 2016 level. Company-owned restaurants comps grew 0.6% and comparable-restaurant guest counts increased 0.4%.
However, adjusted earnings declined to $2.49 per share from $2.78 a year ago.
Red Robin had cash and cash equivalents of $17.7 million as of Dec 31, 2017, compared with $11.7 million as of Dec 25, 2016. The company’s long-term debt amounted to $266.4 million as of Dec 31, 2017, against $336.4 million at the end of 2016 (as of Dec 25, 2016).
First-Quarter 2018 View
Earnings per share are estimated between 60 cents and 80 cents. This reflects the loss of one high volume revenue week as compared with a year ago. Meanwhile, the Zacks Consensus Estimate of $1.12 is much higher than the guided range.
Red Robin anticipates earnings in the band of $2.40-$2.80 per share, reflecting 14-33% year over year growth (after adjusting 2017 for the 53rd week). The Zacks Consensus Estimate for 2018 is pegged at $2.72.
Red Robin projects comparable-restaurant sales growth of 50-150 bps. Operating weeks are expected to decline 1% as 2018 will have 52 weeks compared with 53 weeks in 2017. Total revenues are expected between a decline of 50 bps and an increase of 50 bps in 2018.
Cost of sales, as a percentage of restaurant revenues, is projected to be up 50-100 bps.
Restaurant labor costs, as a percentage of restaurant revenues, are expected to range between an increase of 25 bps and a decrease of 25 bps.
Red Robin has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Cheesecake Factory Inc.’s (CAKE - Free Report) fourth-quarter 2017 earnings met analysts’ expectations, while revenues surpassed the same. A challenging operating environment in the U.S. restaurants space has been affecting the company’s performance.
McDonald's (MCD - Free Report) reported fourth-quarter 2017 adjusted earnings per share of $1.71, beating the consensus mark of $1.59 by 7.5%. The bottom line also improved 19% from the year-ago quarter (16% in constant currency). The upside reflects strong operating performance and G&A savings.
Chipotle Mexican Grill (CMG - Free Report) posted mixed fourth-quarter 2017 results, with adjusted earnings of $1.34 per share surpassing the consensus estimate of $1.32 by 1.5%. The bottom line also grew 143.6% year over year on lower costs and higher revenues.
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