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Why Is Dave & Buster's (PLAY) Up 6.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Dave & Buster's (PLAY - Free Report) . Shares have added about 6.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Dave & Buster's due for a pullback? 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.

Dave & Buster's Q3 Earnings & Revenues Top Estimates

Dave & Buster's Entertainment, Inc. reported third-quarter fiscal 2019 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. While the company’s bottom line marked second consecutive beat, the top line reverted to positive after two straight quarters of miss.

In the quarter under review, adjusted earnings came in at 10 cents per share, which outpaced the Zacks Consensus Estimate of break-even earnings. In the year-ago quarter, the company had reported earnings of 30 cents per share.

Detailed Revenue Discussion

Quarterly revenues of $299.4 million surpassed the consensus mark of $296 million. The top line also rose 6.1% from the prior-year quarter number. The upside was primarily driven by consistent unit growth, and robust Amusements and Other revenues as well as Food and Beverage revenues.

Food and Beverage revenues (41.6% of total revenues in the fiscal third quarter) increased 4.9% year over year to $124.6 million, and Amusement and Other revenues (58.4%) rose 7% to $174.7 million.

Meanwhile, overall comps decreased 4.1% in the fiscal third quarter compared with a 1.8% decline in the year-ago quarter. This decrease can be attributed to a 4.6% decline in walk-in sales, which overshadowed a 0.7% increase in special events sales. Moreover, comps at Amusements & Other decreased 3.9%, the same declined 4.4% at Food & Beverage.

Non-comparable store revenues in the reported quarter increased 53.3% from the year-ago quarter to $75.4 million.

Operating Highlights

In the third quarter, operating margin contracted roughly 330 basis points (bps) year over year to 2.2%.

Adjusted EBITDA increased 12.1% to $86 million compared with $46.3 million in the same period last year. Meanwhile, the EBITDA margin contracted 320 bps year over year to 15.5%.

Balance Sheet

As of Nov 3, 2019, cash and cash equivalents totaled $20.9 million compared with $21.6 million as of Feb 3, 2019.

Long-term debt summed $640.4 million at the end of the reported quarter, up from $378.5 million at the end of Feb 3, 2019.

During the fiscal third quarter, the company repurchased roughly 2.4 million shares for $97 million.

Store Development

Dave & Buster’s launched four stores during the fiscal third quarter in Concord, CA; Huntsville, AL; McDonough, GA; and Wichita, KS. In fiscal 2019, management expects to open 16 stores in new locations, with 12% unit growth.

Fiscal 2019 Outlook

Dave & Buster’s updated its fiscal 2019 guidance. The company expects total revenues of $1.347-$1.354 billion compared with $1.338-$1.359 billion projected earlier. Comps are anticipated to be in the range of -3% to -2.5% compared with prior guided range of down 3.5% to 2%. Adjusted EBITDA is expected to be $275-$280 million, down from $272-$282 million anticipated earlier.

In an effort to drive near and long-term value, the company is focusing on five priorities —revival of existing stores, building guest engagement, cost management, investment in highest-return new locations, and share repurchases and dividend payments.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Dave & Buster's has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Dave & Buster's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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