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Red Robin's (RRGB) Shares Decline Despite Q4 Earnings Beat

Zacks Equity Research
While a number of stocks have incurred heavy losses so far this month, a few are still shining and enjoying their ascent.

Red Robin Gourmet Burgers, Inc. RRGB 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. Shares of Red Robin declined 2.2% in the after-hours trading on Feb 26. The company has also underperformed the S&P 500’s rally over the past year.

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.

Zacks Rank & Peer Releases

Red Robin currently carries a Zacks Rank #4 (Sell).

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

Brinker EAT reported mixed second-quarter fiscal 2019 results, wherein earnings were in line with the Zacks Consensus Estimate but revenues surpassed the same. Adjusted earnings of 89 cents per share were in line with the Zacks Consensus Estimate and increased 2.3% on a year-over-year basis.

McDonald’s MCD reported impressive fourth-quarter 2018 results. Adjusted earnings of $1.97 per share surpassed the consensus mark of $1.90 and increased 15% from the year-ago quarter (18% in constant currencies). The upside reflects stronger operating performance.

Starbucks SBUX reported impressive first-quarter fiscal 2019 results. Adjusted earnings of 75 cents per share surpassed the Zacks Consensus Estimate of 65 cents and grew 15.4% on a year-over-year basis.

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