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Noodles & Company (NDLS) Misses on Q4 Earnings & Revenues

Zacks Equity Research

Noodles & Company NDLS reported fourth-quarter 2018 results, with earnings and revenues missing the Zacks Consensus Estimate. Following the results, the company’s shares declined nearly 1.8% in after-hour trading session on Mar 14. In fact, the stock has plummeted 41% in the past six months, against the industry’s rise of 14.1%.

Adjusted earnings of a penny missed the consensus mark of 2 cents and remained flat on a year-over-year basis. Meanwhile, revenues of $113.2 million lagged analysts’ expectation of $114 million but inched up 0.4% year over year. The upside was primarily driven increase in restaurant revenues.

Let’s delve deeper into the numbers

Comps Discussion

In the fourth quarter, Noodles & Company’s system-wide comps increased 4% compared with a gain of 5.5% in third-quarter 2018. Company-owned and franchise restaurant comps also increased 3.7% and 5.3% compared with gain of 5.2% and 7.6% in the third quarter, respectively.

Comps in the quarter were favored by a successful implementation of various operational, price and product mix benefits. Traffic was almost flat in the reported quarter.

Noodles & Company Price, Consensus and EPS Surprise


Noodles & Company Price, Consensus and EPS Surprise | Noodles & Company Quote


Costs & Margins

Total costs and expenses in the fourth quarter slipped 0.4% due to sharp decline in restaurant impairments, closure costs and asset disposals as well as occupancy costs. However, labor costs as well as general and administrative expenses increased in the quarter.

Restaurant contribution margin was 15.2% in the fourth quarter of 2018 compared with 15.1% in the fourth quarter of 2017, up 10 basis points. This uptick is attributable to leverage on higher average unit volumes during the fourth quarter of 2018, marginally overshadowed by rise in operating expenses.

Balance Sheet

Total current assets as of Jan 1, 2019 amounted to roughly $23.4 million, up from $22.1 million as on Jan 2, 2018. Long-term debt in the quarter amounted to $44.2 million, up from $57.6 million in the fourth quarter of 2017.

Total stockholders’ equity as of Jan 1, 2019 totaled $52.7 million, down from $35.9 million as on Jan 2, 2018.

2018 Revenues

In 2018, total revenues inched up 0.3% year over year to $457.8 million. The figure was propelled by rise in comparable restaurant sales, which offset the impact of company-owned restaurant closures since 2017.

System-wide comps in 2018 increased 3.7%, including a 3.4% increase for company-owned restaurants and 5.5% for franchise restaurants.

2019 Outlook

The company expects adjusted earnings per share in the range of 6-15 cents compared with 2 cents reported in 2018. Restaurant contribution margin is expected in the range of 15.2-16.5%. Total revenues are expected in the range of $462-$470 million. Comps in 2019 are expected to be up 2-4%. Capital expenditure are expected in the range of $24.0-$30.0 million.

Zacks Rank & Key Picks

Noodles & Company has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Brinker International, Inc EAT, Starbucks Corporation SBUX and Darden Restaurants, Inc DRI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brinker International current-year earnings are likely to grow by 10%.

Starbucks delivered positive earnings surprise in all of the trailing four quarters, the average being of 18.3%.

Darden Restaurants generated better-than-expected earnings in three of the trailing four quarters, with an average of 4%.

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