AFC Enterprises Outperforms in 4Q - Analyst Blog
March 06 2013 - 4:00AM
Zacks
AFC Enterprises
Inc. (AFCE) posted adjusted earnings of 34 cents per share
in the fourth quarter of 2012, outpacing the Zacks Consensus
Estimate of 31 cents and the year-ago quarter level of 24 cents per
share. In full year 2012, earnings per share were $1.24 versus 99
cents in 2011.
The year-over-year improvement was
driven by the company’s strong top line and comparable sales
growth. Moreover, the company has five strategic plans in place.
These include development of the Popeye’s brand, more value-added
services through its restaurant concepts, strengthening of
restaurant profit margin with cost-saving initiatives, higher new
unit growth and improving its work culture.
Behind the Headline
Numbers
The operator and franchisor of
Popeye’s restaurants reported total revenues of $47.5 million in
the fourth quarter, up 30.9% from the year-ago quarter on positive
global same-store sales and unit growth. The revenues in the
quarter surpassed the Zacks Consensus Estimate of $45 million. In
full year 2012, total revenues went up 16% year over year to $178.8
million on positive same-store sales of 6.9%.
AFC Enterprises' total revenues
primarily comprise company-operated restaurant sales (up 32.3% year
over year at $16.4 million), franchise revenues (up 31.4% at $30.1
million) and rent and other revenues (flat at $1.0 million).
In the fourth quarter, the
company's global same-store sales spiked 6.2%, resulting from a
6.4% upside in domestic same-store sales and a 4.3% jump in
international franchisee same-store sales.
In the quarter, operating profit
was $14.6 million, up 55.3% year over year.
Store Update
The Popeye’s system opened 62
restaurants in the fourth quarter of 2012; 42 of which were
domestic and 20 international. At the end of the fiscal year, the
company had 2,104 restaurants, among which 1,679 were company-owned
and 425 international units. In full fiscal 2012, the company
opened 141 units and shut down 75 units.
Share
Repurchase
During the fourth quarter, the
company bought back 144,000 shares worth $3.7 million. In 2012, the
company repurchased nearly 741,000 at the cost of $15.2 million.
Moreover, management has also recently authorized an extra $50
million for the existing share repurchase program.
Financial
Position
AFC Enterprises ended the quarter
with cash and cash equivalents of $17 million versus $24.8 million
in the previous quarter. Shareholders' equity in the quarter was
$34.2 million compared with $26.9 million in the third quarter of
2012.
Outlook
The company expects same-store
sales to grow in the range of 3% to 4% in 2013. Adjusted earnings
per share are anticipated to be $1.37 to $1.42.
The quick-service chicken
restaurant chain expects to open 175 to 195 restaurants and net
restaurant openings will likely range from 85–115 in 2013. For
2013, AFC Enterprises sets a target of nearly $15 million to $20
million for share buyback.
In the long-term, the company
expects comps to be positive ranging from 1% to 3% and net unit
will grow within the range of 4% and 6%, whereas earnings per share
will improve 13% to 15%.
Our Take
The company with its solid product
pipeline, improving top line, better operational strategy and unit
growth is well positioned to perform better in the future. However,
higher commodity inflation could weigh on the company’s results,
going ahead.
AFC currently retains a Zacks Rank
#4 (Sell). Another restaurateur Red Robin Gourmet Burgers
Inc.’s (RRGB) adjusted earnings in the fourth quarter of
2012 were way ahead of the Zacks Consensus Estimate as well as the
year-ago quarter’s earnings. Red Robin Gourmet currently carries a
Zacks Rank #1 (Strong Buy).
Other restaurant companies like
Krispy Kreme Doughnuts, Inc. (KKD) and
Burger King Worldwide, Inc (BKW) both with a Zacks
Rank #2 (Buy) are expected to perform well, going ahead.
AFC ENTERPRISES (AFCE): Free Stock Analysis Report
BURGER KING WWD (BKW): Free Stock Analysis Report
KRISPY KREME (KKD): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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