Earnings Preview: Red Robin - Analyst Blog
May 15 2012 - 6:00AM
Zacks
Casual dining restaurant operator
Red Robin Gourmet Burgers Inc. (RRGB) is scheduled
to announce its first quarter 2012 results on May 16. The current
Zacks Consensus Estimate for the first quarter is 66 cents on
revenue of $307.0 million.
Earnings
Surprise
With respect to earnings surprises
over the trailing four quarters, Red Robin has outperformed the
Zacks Consensus Estimate in all the four quarters. The earnings
surprise ranges from 13.6% to 141.7%, with the average at 54.4%.
This indicates that the company has surpassed the Zacks Consensus
Estimate by the same magnitude over the last four quarters.
Prior Quarter
Highlights
Red Robin posted fourth quarter
2011 adjusted earnings of 28 cents per share, way ahead of the
Zacks Consensus Estimate of 20 cents as well as the year-ago
quarter earnings of 13 cents per share. However, including asset
impairment and restaurant closure costs, GAAP net income in the
reported quarter came in at $2.9 million or 20 cents per share.
Revenues in the fourth quarter rose
7.0% year over year to $206.0 million. During the quarter,
restaurant sales increased leaped 7.0% year over year to $202.5
million and franchise royalties and fees revenue crept up 1.0% to
$3.1 million on comparable sales growth.
Comparable restaurant sales
improved 4.8% year over year at company-owned restaurants in the
reported quarter and restaurant operating margin at company-owned
restaurants expanded 290 bps to 19.9%.
Outlook
In 2012, Red Robin expects comps to
grow in the low-single-digit range and restaurant operating margin
to expand modestly year over year, benefiting from lower operating
costs and price increase, partially offset by higher commodity
costs.
Additionally, the company expects
cost of sale to increase 60–80 basis points in 2012 due to a higher
ground beef costs. Furthermore, labor expense is estimated to jump
20-30 bps in 2012, riding on a number of accretive initiatives
taken in 2011 and a rise in minimum wages across a number of
states, particularly in the west.
In 2012, the company plans to open
13 to 15 new restaurants.
Zacks
Consensus
The analysts covered by Zacks
expect Red Robin to post earnings of 66 cents per share for the
first quarter of fiscal 2012, higher than the prior-year earnings
of 58 cents. Currently, the Zacks Consensus Estimate ranges between
62 cents and 72 cents a share.
Earnings Estimate Revisions
– Overview
Estimates have not budged in the
last 7 days, implying that the analysts do not view any surprises
ahead of the earnings release. Of the analysts covering the stock,
67% are positive, 11% are neutral and 22% are negative on the
stock.
Estimate Revision
Trend
Out of the nine analysts providing
estimates for the upcoming quarter, 2 analysts reduced the
estimates; but none moved in the opposite direction in the last 30
days. The analysts have slashed the estimates due to the overall
slowdown in same-store sales toward the end of the first quarter.
For both fiscal 2012 and 2013, one analyst raised the estimate and
one analyst trimmed the same in the last 30 days, indicating no
directional movement.
None of the analysts made any
estimate revision over the last 7 days, implying the absence of any
meaningful catalysts.
Magnitude of
Revisions
Estimates for the first quarter of
2012 have remained static at 66 cents over the last 30 days due to
the insignificant estimate revisions by the analysts on the stock.
The estimate for 2012 also remained unchanged at $1.88 over the
last 30 days. Therefore, the analysts expect the company to report
in line. However, for 2013, estimates have fallen by 3 cents to
$2.18 over the last 30 days.
Our Take
We are pleased with the progress of
Red Robin’s effort to turnaround its business by Project RED,which
focuses on revenue growth, expense control and capital deployment.
The pace of the company’s ongoing cost saving initiatives is faster
than expected.Moreover, the loyalty program is tremendously
successful. Also, the company is experiencing same-store sales
growth based on its marketingand promotional activities. In
addition, the company’s focus on franchising, unit growth, store
remodeling, investments to improve operational efficiency and
enhancing shareholder value also augur well for its earnings.
However, stiff competition from
other quick-service restaurant operators and cost escalation along
with no price increase will keep margins under pressure.
One of its peers, Chipotle
Mexican Grill Inc. (CMG) has reported first-quarter 2012
earnings of $1.97 per share, surpassing the Zacks Consensus
Estimate of $1.93 as well as the year-earlier earnings of
$1.46.
Red Robin currently retains a Zacks
#3 Rank, which translates into a short-term Hold rating. We are
also maintaining our long-term Neutral recommendation on the
stock.
CHIPOTLE MEXICN (CMG): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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