A month has gone by since the last earnings report for Red Robin (RRGB - Free Report) . Shares have lost about 2.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Red Robin 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 drivers.
Red Robin Q2 Earnings Meet, Revenues Lag Estimates
Red Robin reported mixed second-quarter 2018 results, wherein earnings came in line with the Zacks Consensus Estimate but revenues lagged the same.
Earnings & Revenue Discussion
Red Robin’s adjusted earnings of 46 cents per share came in line with the consensus estimate. However, the bottom-line figure witnessed a sharp decline of 24.6%.
Revenues came in at $315.4 million, which lagged the consensus mark of $318 million and decreased 0.6% from the prior-year quarter. The downside was primarily due to weak restaurant revenues and soft comparable restaurant revenues.
Behind the Headline Numbers
Comps at company-owned restaurants were down 2.6% year over year compared with the prior-quarter comps decline of 0.9%. The downturn can be attributed to a 1.9% decline in average guest check and a 0.7% fall in guest counts.
Restaurant-level operating profit margin contracted 150 basis points (bps) to 19.3%. The decline was due to a 40-bps increase in the cost of sales, 90-bps rise in other restaurant operating expenses and a 50-bps surge in occupancy costs, partly offset by a 40-bps decrease in labor costs.
Adjusted earnings before interest, taxes, and amortization (EBITDA) decreased 10.8% to $28.8 million from $32.3 million in the year-ago quarter.
As of Jul 15, 2018, Red Robin had cash and cash equivalents of $21.9 million compared with $17.7 million as of Dec 31, 2017. The company’s long-term debt amounted to $221.4 million as of Jul 15, 2018, compared with $266.4 million at the end of 2017.
Red Robin updated its guidance for 2018. The company anticipates earnings to be $1.80-$2.20 per share, down sharply from the prior estimate of $2.40-$2.80. The Zacks Consensus Estimate for 2018 is currently pegged at $2.00.
Comparable-restaurant sales are expected to decline in the range of 1-2% compared with the earlier estimate of 50-150 bps growth. Total revenues are envisioned to be between $1.350 billion and $1.365 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -29.56% due to these changes.
At this time, Red Robin has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Red Robin has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.