Credit: Shutterstock photoShares of Wingstop, Inc.WING plummeted almost 10.2% in after-hours trading on Feb 22, after the company reported fourth-quarter 2017 results. Although the company reported better-than-expected results, the company's outlook seems to have disappointed investors.
Earnings & Revenue Discussion
Wingstop's adjusted earnings of 17 cents per share surpassed the Zacks Consensus Estimate of 16 cents and improved 13.3% year over year.
Revenues of $28.3 million also beat the Zacks Consensus Estimate of $27.4 million and increased 14.3% from the prior-year quarter. This improvement was driven by higher royalty revenues and franchise fees as well as improvement in company-owned restaurant sales.
Behind the Headline Numbers
Royalty revenues and franchise fees amounted to $18.3 million compared with $15.6 million in the prior-year quarter. The improvement was led by a 13.6% increase in the number of franchised restaurants and domestic same-store sales growth of 5.2%, partially offset by revenues of approximately $0.9 million related to the 53rd week in 2016.
Company-owned restaurant sales grew 9.9% year over year to $10 million. The upside was attributable to the acquisition of two restaurants in July 2017 that contributed $1 million to total sales. Again, company-owned domestic same store sales growth was 4.6% owing to higher transactions and the opening of a company-owned restaurant.
Cost of sales, as a percentage of company-owned restaurant sales, decreased 160 basis points (bps) in the quarter, given the cost leverages, owing to solid company-owned domestic same store sales growth and the acquisition of two previously franchised locations.
However, selling, general & administrative expenses (SG&A) increased 19.9% in the quarter due to the expenses incurred associated with its franchisee convention, overhead additions and an increase in stock-based compensation.
Adjusted earnings before interest, taxes, and amortization (EBITDA) grew to $11.3 million from $10 million in the year-ago quarter.
Wingstop Inc. Price, Consensus and EPS Surprise
Wingstop Inc. Price, Consensus and EPS Surprise | Wingstop Inc. Quote
2017 Highlights
Total revenues increased 15.5% to $105.6 million from $91.4 million in 2016. Adjusted earnings came in at 74 cents per share compared with 58 cents a year ago.
2018 View
Adjusted earnings per share are estimated to be 75 cents. Meanwhile, the Zacks Consensus Estimate of 82 cents is pegged much higher than the guided range. However, the company's expectation is comparable to adjusted earnings per share of 69 cents in 2017, which has been restated to reflect the new revenue recognition standards.
Wingstop projects domestic same-store sales growth in low single digits and more than 10% system-wide unit growth.
Wingstop carries a Zacks Rank #3 (Hold).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Peer Releases
The Cheesecake Factory Inc.'s CAKEfourth-quarter 2017 earnings met analysts' expectations, while revenues surpassed the same. A challenging operating environment in the U.S. restaurants space has been affecting the company's performance.
McDonald's MCD reported fourth-quarter 2017 adjusted earnings per share of $1.71, beating the consensus mark of $1.59 by 7.5%. The bottom line also improved 19% from the year-ago quarter (16% in constant currency). The upside reflects strong operating performance and G&A savings.
Chipotle Mexican Grill CMG posted mixed fourth-quarter 2017 results , with adjusted earnings of $1.34 per share surpassing the consensus estimate of $1.32 by 1.5%. The bottom line also grew 143.6% year over year on lower costs and higher revenues.
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Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report
The Cheesecake Factory Incorporated (CAKE): Free Stock Analysis Report
McDonald's Corporation (MCD): Free Stock Analysis Report
Wingstop Inc. (WING): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
