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Red Robin (RRGB) Stock Gains on Q2 Earnings & Revenue Beat

Zacks

Shares of Red Robin Gourmet Burgers Inc. RRGB were up over 2% in afterhours trading on Aug 8, after the company reported better-than-expected second-quarter 2017 results.

Earnings & Revenue Discussion

Red Robin’s adjusted earnings of 61 cents per share surpassed the Zacks Consensus Estimate of 51 cents by 19.6%. However, the bottom line declined 18.7% year over year, due to lower margins.

Revenues of $315.8 million came above the Zacks Consensus Estimate of $315 million by 0.3% and increased 3.3% year over year. This improvement was driven by higher restaurant revenues, somewhat offset by lower franchise royalties, fees and other revenues.

Behind the Headline Numbers

During the quarter, Red Robin’s restaurant revenues rose 3.4% year over year to nearly $312.4 million. The uptick was owing to new restaurant openings and higher comps, somewhat offset by loss of revenues from closed restaurants. Franchise royalties and fee revenues of $3.4 million were almost flat year over year.

Company-owned restaurants comps inched up 0.5% year over year against the prior-quarter comps decline of 1.2%. The increase was led by a 1% rise in guest counts, partially offset by a 0.5% decline in average guest check. Notably, the decrease in average guest check comprised a 2.2% drop in menu mix, somewhat offset by a 1.7% increase in pricing.

Despite lower occupancy costs, restaurant-level operating profit margin decreased 100 basis points (bps) to 19.9%, due to higher cost of sales, elevated labor costs and increase in other restaurant operating expenses.

Adjusted earnings before interest, taxes, and amortization (EBITDA) decreased 3.6% to $32.3 million from $33.5 million in the year-ago quarter.

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise | Red Robin Gourmet Burgers, Inc. Quote


Third-Quarter View

For the third quarter, earnings per share are estimated between 20 cents and 30 cents. Notably, the Zacks Consensus Estimate of 50 cents is pegged much higher than the guided range.

Guidance for 2017

For full-year 2017, Red Robin anticipates earnings to fall in the lower end of the earlier guided range of $2.80 to $3.10 per share. The Zacks Consensus Estimate for 2017 is pegged at $2.89.

Red Robin continues to expect total revenue growth in 2017 between 6% and 8%. This includes comparable restaurant revenue growth in the range of 0.5% to 1.5%. Additionally, the growth is expected to be driven by increased operating weeks associated with locations opened in 2016 and 2017, as well as the 53rd week in 2017.

Cost of sales, as a percentage of restaurant revenue, is projected to be in the range of down 25 bps to up 25 bps in 2017 compared with 2016, given the impact of higher beef and potato prices in the second half of the year.

Restaurant labor costs, as a percentage of restaurant revenue, are expected to be flat to up 50 bps year over year, due to minimum wage increases in more highly penetrated markets, elevated benefit costs and restaurant manager bonuses, to some extent offset by the effect of pricing and improvements in labor productivity.

Adjusted EBITDA in 2017 is likely to be in between $145 million and $155 million.

Capital expenditures are expected to be roughly between $85 million and $95 million.

Meanwhile, the company plans to open roughly 17 and close nine Red Robin locations in 2017.

Currently, Red Robin has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

McDonald's Corp. MCD reported second-quarter adjusted earnings per share of $1.73, beating the Zacks Consensus Estimate of $1.62 by 6.8%. The bottom line also increased 19% year over year.

Chipotle Mexican Grill, Inc.’s CMG second-quarter 2017 adjusted earnings of $2.32 per share outpaced the Zacks Consensus Estimate of $2.16 by 7.4%. The figure also increased significantly from the prior-year quarter earnings of 87 cents, given a substantial rise in revenues.

Darden Restaurants, Inc.’s DRI fourth-quarter fiscal 2017 adjusted earnings of $1.18 per share outpaced the Zacks Consensus Estimate of $1.15 by 2.6%. Further, the bottom line increased 7.3% year over year on the back of higher revenues and lower share count.

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