Red Robin Gourmet Burgers, Inc. : Craig-Hallum Cuts Target Price To $8.5 From $11.5

Red Robin Gourmet Burgers, Inc. RRGB posted mixed third-quarter fiscal 2024 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. Both top and bottom lines declined year over year. Following the results, the company’s shares declined 10.1% during yesterday’s after-hours trading session.

Red Robin’s third-quarter fiscal 2024 results declined despite some positive developments in restaurant performance and customer satisfaction. The company’s CEO G.J. Hart emphasized that its “North Star Plan” has been gaining traction, with Red Robin’s comparable restaurant revenues exceeding industry averages and customer traffic rebounding in the latter part of the quarter.

However, the macroeconomic environment added significant pressure to Red Robin’s recovery, hampering the overall impact of these operational gains. While the brand has made strides in rebuilding its customer base and revamping RRGB’s loyalty program, broader economic challenges limited the extent of its financial improvement.

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Delving Deeper Into RRGB’s Q3 Performance

In the fiscal third quarter, RRGB recorded an adjusted loss per share of $1.13, wider than the Zacks Consensus Estimate of a loss of 87 cents. The company reported an adjusted loss per share of 79 cents in the prior-year quarter.

Quarterly revenues of $274.6 million beat the consensus mark of $272 million. However, the top line declined 1.1% year over year. In the quarter under review, comparable restaurant revenues increased 0.6% year over year.

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

RRGB’s Operating Results

The restaurant-level operating profit margin was 9% in the fiscal third quarter compared with 11.1% in the prior-year quarter. Our projection for the metric was 10.2%.

In the fiscal third quarter, restaurant labor costs increased 3.8% year over year to $107.7 million. The figure compares with our projection of $105.1 million.

Other operating costs was $49.7 million compared with $50.4 million reported in the prior-year quarter. Our prediction for the metric was $47.3 million.

Adjusted earnings before interest expenses, income taxes, depreciation and amortization (EBITDA) in the fiscal third quarter amounted to $2.1 million compared with $6.8 million in the prior-year quarter. Our estimate for the metric was $6.3 million.

Other Financial Information of RRGB

As of Oct. 6, 2024, RRGB had cash and cash equivalents of $22 million compared with $23.6 million as of Dec. 31, 2023. Long-term debt, as of Oct. 6, 2024, was $180.7 million compared with $182.6 million in the prior-year quarter. Inventories in the quarter were $27.5 million compared with $27.3 million in the previous quarter.

RRGB’s 2024 Guidance

For fiscal 2024, the company continues to expect total revenues to be approximately $1.25 billion. Restaurant-level operating profit is anticipated to be 10.5% down from the previous expectation of 11-11.5%. Capital expenditures are anticipated to be $25 million. In 2024, adjusted EBITDA is expected in the range of $35-$37.5 million, down from the previous expectation of $40-$45 million.

RRGB’s Zacks Rank

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

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

Recent Retail-Wholesale Releases

Chipotle Mexican Grill, Inc. CMG reported mixed third-quarter 2024 results, with earnings beating the Zacks Consensus Estimate for the seventh consecutive quarter but revenues missing the same after beating in the preceding four quarters.

CMG reported adjusted EPS of 27 cents, surpassing the Zacks Consensus Estimate of 25 cents. The bottom line increased 17.4% from 23 cents reported in the year-ago quarter. Quarterly revenues of $2,793.6 million missed the consensus mark of $2,817 million. However, the top line rose 13% on a year-over-year basis. This upside was driven by strong comparable restaurant sales growth, backed by higher transactions of 3.3% as well as a 2.7% rise in average checks.

Shake Shack Inc. SHAK posted third-quarter fiscal 2024 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Both top and bottom lines also increased on a year-over-year basis. The company ramped up its investment in marketing strategies and programs, aimed at increasing guest engagement and brand awareness, even amid a challenging market environment. These efforts have paid off, as the company has achieved some of the highest brand awareness levels on record, which, in turn, is fueling robust sales and profitability growth.

SHAK’s fiscal third-quarter adjusted EPS came in at 25 cents, which beat the Zacks Consensus Estimate of 20 cents. In the prior-year quarter, the company reported adjusted EPS of 17 cents. Quarterly revenues of $316.9 million beat the consensus mark of $315 million. The top line increased 14.7% on a year-over-year basis.

BJ's Restaurants, Inc. BJRI reported third-quarter fiscal 2024 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. Both top and bottom lines increased on a year-over-year basis.

The company reported an adjusted loss per share of 13 cents. The Zacks Consensus Estimate for the metric was 3 cents per share-. In the year-ago quarter, it recorded an adjusted loss per share of 16 cents. Total revenues of $325.7 million beat the consensus mark by 0.04%. The top line inched up 2.2% year over year. This upside was backed by strong guest traffic and Pizookie Meal Deal performance.

Zacks Investment Research

Red Robin (RRGB) reported $274.64 million in revenue for the quarter ended September 2024, representing a year-over-year decline of 1.1%. EPS of -$1.13 for the same period compares to -$0.79 a year ago.

The reported revenue compares to the Zacks Consensus Estimate of $271.64 million, representing a surprise of +1.10%. The company delivered an EPS surprise of -29.89%, with the consensus EPS estimate being -$0.87.

While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance.

Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance.

Here is how Red Robin performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts:

• Number of restaurants - Total: 92 compared to the 504 average estimate based on three analysts.
• Comparable restaurant revenue - YoY change: 0.6% compared to the -1.5% average estimate based on three analysts.
• Number of restaurants - Franchised: 92 versus 93 estimated by two analysts on average.
• Number of restaurants - Company-owned: 408 compared to the 411 average estimate based on two analysts.
• Revenues- Restaurant revenue: $270.61 million compared to the $266.92 million average estimate based on three analysts. The reported number represents a change of -0.9% year over year.

View all Key Company Metrics for Red Robin here>>>

Shares of Red Robin have returned +28.5% over the past month versus the Zacks S&P 500 composite's +0.7% change. The stock currently has a Zacks Rank #4 (Sell), indicating that it could underperform the broader market in the near term.

Zacks Investment Research

Red Robin (RRGB) came out with a quarterly loss of $1.13 per share versus the Zacks Consensus Estimate of a loss of $0.87. This compares to loss of $0.79 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -29.89%. A quarter ago, it was expected that this casual restaurant chain would post a loss of $0.41 per share when it actually produced a loss of $0.48, delivering a surprise of -17.07%.

Over the last four quarters, the company has not been able to surpass consensus EPS estimates.

Red Robin, which belongs to the Zacks Retail - Restaurants industry, posted revenues of $274.64 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.10%. This compares to year-ago revenues of $277.56 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Red Robin shares have lost about 51.2% since the beginning of the year versus the S&P 500's gain of 21.2%.

What's Next for Red Robin?

While Red Robin has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Red Robin: unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is -$0.23 on $288.09 million in revenues for the coming quarter and -$2.37 on $1.25 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Retail - Restaurants is currently in the top 31% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

First Watch Restaurant Group, Inc. (FWRG), another stock in the same industry, has yet to report results for the quarter ended September 2024. The results are expected to be released on November 7.

This company is expected to post quarterly earnings of $0.05 per share in its upcoming report, which represents a year-over-year change of -44.4%. The consensus EPS estimate for the quarter has been revised 28.6% lower over the last 30 days to the current level.

First Watch Restaurant Group, Inc.'s revenues are expected to be $260.05 million, up 18.6% from the year-ago quarter.

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