Restaurant Companies Deliver Results

TheStreet.com

NEW YORK (TheStreet) -- Tuesday was a good day in restaurant land. A number of companies reported quarterly results, and all of them exceeded consensus estimates for both revenue and earnings.

The restaurant sector continues to perform quite well; a basket of 33 names that I follow is up an average of 23.5% year to date, more than 1,100 basis points better than the S&P 500.

The restaurant sector has turned in a couple of years of blistering performance, but now many observers fear a slowdown caused by rising commodity costs.

Although some prices have risen, they haven't been sufficient to keep the the consumer away for the most part, and even in a still-challenged economy, eating outside the home appears to be one of our nation's greatest pastimes.

On Tuesday, Denny's , Bloomin Brands , Del Frisco's and Domino's Pizza all reported first-quarter results; you could not find a more diverse set of restaurant names.


Denny's, the back-from-bankruptcy work in progress, continues to move the ball forward. The company reported EPS of 8 cents, a penny better than the 7-cent consensus. Actual revenue of $114.5 million topped the consensus estimate of $112.7 million.

The company continues to whittle away at what was once substantial debt. It's also buying back shares. If there was any negative news, it was that same-store sales were down 0.7% vs. last year. Still, the comeback continues. I closed my Denny's position late in 2012 after a very nice run and left some money on the table. It's nice to see that the company at last has a positive book value per share (2 cents), as small as that may be.

DENN Chart
DENN data by YCharts

Meanwhile, Domino's continues to deliver, beating consensus estimates of 55 cents by 4 cents. This name has taken the industry by storm ever since a brilliant advertising campaign a few years ago where the company admitted that it's pizza recipe was not as good as it could be, and changed the formula. Shares are up more than fivefold since 2010.

DPZ Chart
DPZ data by YCharts


Bloomin' Brands is the new kid on the block, having gone public last August. But the company's brands, which include Outback Steakhouse, Bonefish Grill and Carrabba's, have been around for quite a while.

This is a fairly large operator, with 1,471 restaurants in 48 states and 21 countries. First-quarter EPS of 50 cents handily beat the 44-cent consensus.


This name is somewhat new to me, but I'll be doing some work on it. The company ended the first quarter with $217 million in cash and $1.46 billion in debt. That's more debt than I typically like to see, but the company also owns the real estate for 20% of its locations. Since the IPO, shares are up nearly 90%.

Lastly, Del Frisco's, which runs 34 upscale steakhouses, reported earnings of 21 cents, a penny better than the consensus, while revenue of $59.8 million topped the $58.5 million analyst consensus. The company went public last July, and shares are up 33% since then. Talk about contrasts in restaurant concepts -- Denny's vs. Del Frisco's -- but both still managed decent quarters.

We did see the effects of higher input costs on Monday, when Buffalo Wild Wings reported a worse-than-expected quarter due to higher chicken wing prices. That may be a case where the company's pricing power is somewhat limited. As much as I love wings and consider them to be one of the major food groups, I find Buffalo Wild Wings prices to be on the high side. I would opt to make my own at home rather than pay those prices. Things sure have changed since the $10 buckets of wings during the college days at the original Quaker Steak and Lube in Sharon, Pa.!

At the time of publication, Heller had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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