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Red Robin's (RRGB) Q2 Earnings & Revenues Beat Estimates

Zacks Equity Research

Red Robin Gourmet Burgers, Inc. RRGB reported second-quarter 2019 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Notably, the bottom line surpassed the consensus mark after reporting a miss in the preceding quarter. Following the quarterly results, shares of Red Robin increased 5.9% on Aug 23. In the past six months, the stock has surged 18.2% compared with the industry’s 18.7% growth.

Earnings & Revenue Discussion

Red Robin’s adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate of 31 cents. The bottom line also jumped 130.4% from the year-ago quarter number. Progress on the execution of the five pillars in the company’s strategic plan boosted its profitability.

Revenues came in at $308 million, marginally beating the Zacks Consensus Estimate of $307 million but declined 2.3% from the prior-year quarter. The downside can be primarily attributed to a decline in restaurant revenues.

Additionally, comparable restaurant revenues decreased 1.5% year over year (on constant-currency basis) due to a 6.4% decline in guest count, which overshadowed a 4.9% gain in average check. The increase in average guest check was on account of a 2.3% rise in menu mix and 2.6% hike in pricing.

Operating Results

Restaurant-level operating profit margin contracted 110 basis points (bps) to 18.2%. The decline was due to a 90-bps rise in labor costs and 50 bps increase in other restaurant operating costs. However, cost of sales margin declined 20 bps on account of decrease in waste and lower Tavern mix. Occupancy costs declined 10 basis points owing to restaurant closures.

Adjusted earnings before interest, taxes, and amortization (EBITDA) decreased to $25.5 million from $28.8 million a year ago.

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise

Red Robin Gourmet Burgers, Inc. price-consensus-eps-surprise-chart | Red Robin Gourmet Burgers, Inc. Quote

Financial Highlights

As of Jul 14, 2019, Red Robin had cash and cash equivalents of $26.2 million compared with $18.6 million as of Dec 30, 2018. The company’s long-term debt amounted to $181.4 million as of Jul 14, 2019, compared with $193.4 million as of Dec 30, 2018.

As of Jul 14, 2019, Red Robin had outstanding borrowings under its credit facility of $180.5 million in addition to amounts issued under letters of credit of $7.4 million.

Guidance

For 2019, Red Robin expects earnings of 95 cents-$1.20 per share compared with $1.14-$1.77 projected earlier. The Zacks Consensus Estimate for the same is currently pegged at $1.25. The company continues to expect comparable restaurant revenue growth of down 1% to up 1%.

Red Robin has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

Darden DRI reported fourth-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Adjusted earnings of $1.76 per share outpaced the Zacks Consensus Estimate of $1.73. The bottom line also increased 26.6% year over year on higher revenues.

Domino’s DPZ reported mixed second-quarter 2019 financial numbers, wherein earnings exceeded the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $2.19 per share outpaced the Zacks Consensus Estimate of $2.00. The metric also increased 19% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.

Chipotle CMG reported better-than-expected results in the second quarter of 2019. Its adjusted earnings of $3.99 per share surpassed the Zacks Consensus Estimate of $3.69 by 8.1%. The bottom line also grew 39% from the year-ago quarter number backed by solid revenues and strong operating margins.

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