Dave & Buster's (PLAY) Up 8.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Dave & Buster's (PLAY). Shares have added about 8.3% 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 Q4 Earnings & Revenues Beat Estimates

Dave & Buster’s reported better-than-expected earnings and revenues for the fourth quarter of fiscal 2018. Adjusted earnings of 75 cents surpassed the Zacks Consensus Estimate of 63 cents by 19%. The bottom line also compared favorably with the prior-year quarter’s earnings of 85 cents, which, after certain tax adjustments, came in at 66 cents.

Results were aided by solid segmental revenues and consistent unit growth. The company’s increased focus on generating value, better weather conditions and improvement in offerings aided the reported quarter’s results.

Detailed Revenue Discussion

Quarterly revenues of $331.8 million outpaced the consensus mark by 1.6%. The top-line figure increased 15.7% from the prior-year quarter. The top line was primarily favored by consistent unit growth.

Food and Beverage revenues (44.5% of total revenues in the fiscal fourth quarter) increased 6.5% year over year to $147.7 million while Amusement and Other revenues (55.5%) rose 10.7% to $184.1 million.

Overall comps increased 2.9% in the fiscal fourth quarter, comparing favorably with a decrease of 5.9% in the year-ago quarter. This increase in comps can be attributed to a 3.7% rise in walk-in sales offset by a 1.4% decrease in special events sales. Comps at Amusements & Other increased 4.4% and inched up 1.1% in Food & Beverage.

Non-comparable store revenues in the reported quarter increased 71.9% from the year-ago quarter to $91.9 million.

Operating Highlights

In the reported quarter, operating margin declined roughly 150 basis points (bps) year over year to 12.4%.

Net income in the fiscal fourth quarter totaled $29.4 million, down from $35.6 million in the prior-year quarter. Adjusted EBITDA decreased 2.8% to $80.2 million compared with $82.5 million in the same period last year. Also, EBITDA margin decreased 280 bps year over year.

Balance Sheet

As of Feb 3, 2019, cash and cash equivalents were $21.6 million compared with $18.8 million as of Feb 4, 2018.

Long-term debt totaled $378.5 million at the end of the reported quarter, up from $351.2 million at the end of fiscal 2017.

During the fiscal fourth quarter, the company repurchased roughly 1.3 million shares for $63 million, with an additional 925,000 shares for $44.7 million through Mar 26. As of the same date, cumulatively, management repurchased 7.2 million shares for $374.6 million under the $400-million share repurchase authorization.

On Apr 2, 2019, the company’s board of directors authorized the repurchase of an additional $200-million stock under the existing share repurchase program through the end of fiscal 2020.

Notably, in the fiscal fourth quarter of 2018, management paid a quarterly cash dividend of 15 cents per share. For the first quarter of fiscal 2019, it declared a quarterly cash dividend of 15 cents per share payable on Apr 10, 2019, to shareholders of record as of Mar 26, 2019.

Store Development

Dave & Buster’s launched three stores during the fiscal fourth quarter in Milford, CT; Birmingham, AL; and Corpus Christi, TX. The company also opened the second 17K format store, taking the year’s store opening count to 15.

In fiscal 2019, management expects to open 15-16 stores in new locations, with 12% unit growth. The company already opened five stores in Louisville, KY; North Hills (Pittsburgh), PA; Thousand Oaks, CA; Daytona Beach, FL; and Fairfax, VA. It plans to open two more stores in Ft. Myers, FL, and Sevierville, TN, taking store count to seven in the fiscal first quarter. Currently, there are nine stores under construction.

Fiscal 2019 Outlook

Dave & Buster’s expects total revenues of $1.370-$1.400 billion in fiscal 2019. Comps are anticipated to be flat to up 1.5%. Adjusted EBITDA is expected to be $285-$300 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Dave & Buster's has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Dave & Buster's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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