It has been about a month since the last earnings report for Red Robin (RRGB - Free Report) . Shares have lost about 4.4% 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 catalysts.
Red Robin Q3 Earnings Beat Estimates, Guidance Down
Red Robin reported mixed third-quarter 2018 results, with earnings surpassing the Zacks Consensus Estimate but revenues lagging the same.
Though the bottom line declined in the quarter, the company is continuously trying to better manage labor and food costs to boost earnings.
Earnings & Revenue Discussion
Red Robin’s adjusted earnings of 16 cents per share surpassed the consensus estimate of 12 cents per share. However, the bottom line declined a sharp 23.8%
Revenues totaled $294.9 million, which lagged the consensus mark of $305 million and declined 3.5% from the prior-year quarter. The decrease was primarily due to soft comparable restaurant revenues, driven by decline in dine-in traffic.
Behind the Headline Numbers
Comparable restaurant revenues were down 3.4% year over year due to a 1.5% decline in average guest check and 1.9% fall in guest count. The decline in average guest check resulted from a 3% decrease in menu mix, negated by a 1.5% hike in pricing.
Restaurant-level operating profit margin contracted 180 basis points (bps) to 16.8%. The decline was due to 120-bps rise in other restaurant operating expenses and a 60-bps surge in occupancy costs. However, cost of sales remained flat at 23.8% due to increase in steak fries and the impact of higher Tavern mix, offset by decrease in ground beef and lower food waste. Labor costs also remained flat at 35.3%, owing to improvement in labor productivity.
Adjusted earnings before interest, taxes, and amortization (EBITDA) decreased 5.1% to $24.2 million from $25.5 million a year ago.
As of Oct 7, 2018, Red Robin had cash and cash equivalents of $20.4 million compared with $17.7 million as of Dec 31, 2017. The company’s long-term debt amounted to $220.9 million as of Oct 7, 2018, compared with $266.4 million at the end of 2017.
2018 Guidance Lowered
Red Robin lowered its guidance for 2018. The company anticipates earnings of $1.60-$1.80 per share, down from $1.80-$2.20 mentioned earlier. The Zacks Consensus Estimate for 2018 is currently pegged at $1.91.
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 -40.1% 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 #4 (Sell). We expect a below average return from the stock in the next few months.