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Red Robin (RRGB) Down 1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
Delta Air Lines (DAL) closed at $55.99 in the latest trading session, marking a -0.94% move from the prior day.

A month has gone by since the last earnings report for Red Robin (RRGB). Shares have lost about 1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Red Robin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Red Robin Q4 Earnings Beat, Revenues Miss Estimates

Red Robin reported mixed fourth-quarter 2018 results, with earnings surpassing the Zacks Consensus Estimate but revenues lagging the same. Declining traffic and weakness at in-line mall locations affected revenues in the reported quarter.

Earnings & Revenue Discussion

Red Robin’s adjusted earnings of 43 cents per share surpassed the consensus estimate of 38 cents by 13.2%. However, the bottom line declined 44.9% from the year-ago quarter.

Revenues totaled $306.8 million, which lagged the consensus mark of $308.7 million and declined 10.8% from the prior-year quarter. The downside was primarily due to soft comparable restaurant revenues, driven by decline in dine-in traffic.

Comparable restaurant revenues were down 4.5% year over year due to a 0.1% decline in average guest check and 4.4% fall in guest count. The decline in average guest check resulted from a 0.2% decrease in menu mix, negated by a 0.1% hike in pricing.

Operating Results

Restaurant-level operating profit margin contracted 110 basis points (bps) to 19.4%. The decline was due to 40-bps rise in other restaurant operating expenses and a 20-bps increase in occupancy costs. However, cost of sales margin declined 10 bps due to decrease in ground beef costs, partially offset by increases in steak fries costs and increased dairy costs. Labor costs margin increased 60 basis points due to higher average wage rates and sales deleverage, partially offset by improvement in labor productivity.

Adjusted earnings before interest, taxes, and amortization (EBITDA) decreased 20.8% to $28.4 million from $35.8 million a year ago.

Financial Highlights

As of Dec 30, 2018, Red Robin had cash and cash equivalents of $18.6 million compared with $17.7 million as of Dec 31, 2017. The company’s long-term debt amounted to $193.4 million as of Dec 30, 2018, compared with $266.4 million at the end of 2017.

As of Dec 30, 2018, Red Robin had outstanding borrowings under its credit facility of $192.5 million in addition to amounts issued under letters of credit of $7.8 million.

2019 Guidance

For 2019, Red Robin expects earnings per share of $1.30 to $1.70. The Zacks Consensus Estimate for the same is currently pegged at $1.76. The consensus estimate exceeds the company’s guided range.

Comparable restaurant revenue growth is expected to be flat to up 1%. The restaurant expects to close five company-owned restaurants, with no new openings.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -17.98% due to these changes.

VGM Scores

Currently, Red Robin has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

Red Robin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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