Popeyes Louisiana Kitchen (PLKI), which has set multiple all-time trading highs in 2014, did so again Thursday, this time after the chicken seller posted an astonishing quarterly increase in same-store sales and raised its forecast for the year.
The stock has now surpassed Wall Street's average pre-earnings price goal of $50.83, taking its year-to-date gain to 34.4%. Earlier in the session it traded as high as $52.76. Recently, it was adding 7.6% to $52.15.
When the year began, shares of Popeyes, formerly known as AFC Enterprises, had a compound annual growth of 52.4% in the last half decade. Because of that, and because of a broader slowdown in restaurant stocks overall, Yahoo Finance had said three months ago the stock might be getting overvalued -- even as Popeyes in fact was operating enviably and putting the financial woes of several years back further and further in the past. However, that view on price levels couldn't have been more wrong than what the market saw. It was trading at $39 then, with a 22 forward price-to-earnings ratio, and now it's through $50, with a multiple nearing 28.
The latest surge followed the Atlanta-based restaurant chain's announcement that it earned 42 cents a share in the third quarter, 1 cent ahead of estimates, on revenue of $54.9 million, up around 11% from the same period a year earlier. The top line was $400,000 under the consensus forecast, but that was largely irrelevant to traders who focused on same-store sales growth of 7.3%, far beyond the 2.4% analysts' view, as well as on the improved outlook.
For the full year, Popeyes, which franchises about 98% of its 2,315-store system, now says comparable sales should be up 5% to 5.5%, better than its last guidance of 3% to 4%. The company believes it will earn $1.61 to $1.64 a share, topping its most recent prior range of $1.58 to $1.63, which itself was above the initial view of $1.57 to $1.62.
Meanwhile, Popeyes says its market share of the domestic fast-food chicken sector, where it competes with names like KFC, Bojangles', Chick-fil-A and former fellow AFC company Church's, has risen to 23.7% from 21.2% a year ago. This year, it will open as many as 130 more restaurants, on a net basis.
"One of the things we've done at Popeyes is focus on growing our market share among those competitors," CEO Cheryl Bachelder said in an interview. "It's the only measure that matters in our business -- are you gaining more of the customers than your competition? The question is are we better. And we have to be better all the time," she continued. "This is retail. You're as good as yesterday's sales, and you're not good [again] until tomorrow."
Asked about the same-store sales results during a conference call, Bachelder said that, while the company doesn't break out how much is guest traffic levels vs. customer per-check spending, the Popeyes promotions during the quarter, among them the "Tear'n Tenderloin" and the "$5 Bonafide Big Box," had to get significant credit.
Considering Popeyes is affected heavily by the price of chicken its stores have to purchase, there's some degree of concern about poultry costs in the year ahead. Still, Bachelder said that although management wasn't planning on "favorable" pricing, it was too early to forecast the effects on the menu or profit levels.