Impressive Prelim Results at AFC - Analyst Blog


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AFC Enterprises Inc. ( AFCE ) recently posted impressive preliminary operating results for fiscal 2011 and also lifted the earnings guidance.

In fiscal 2011, global same-store sales spiked 3.1% versus a 2.6% growth in 2010, exceeding the company's previous full-year guidance of 2.0%-2.5%. For the fourth quarter of 2011, global same-store sales increased 5.8%, compared with a 6.0% increase a year ago.  

The company now expects general and administrative expenses for full year 2011 to be in the range of $61.2-$61.4 million. The company's general and administrative expenses account for 3.1% of system-wide sales, which remains one of the lowest in the restaurant industry.

The effective tax rate for the full year is now expected to be approximately 35.0-36.0%, compared with the previous guidance of 36.0-37.0%, due to tax credits recognized during the year.

The operator and franchisor of Popeye's restaurants now expects fourth quarter adjusted EPS to be within the range of 23-24 cents. The company raised its full year adjusted EPS guidance to 98-99 cents from the earlier guidance range of 93 to 97 cents.  Previously, AFC Enterprises increased its 2011 adjusted EPS outlook to 93-97 cents from 91-95 cents per share. On a GAAP basis, AFC Enterprises' fourth quarter earnings are expected to be 22-23 cents and the same for the full year to be 96-97 cents.

Store Update

The company opened 32 domestic and 20 international new Popeye units in fourth-quarter 2011, leading to full year 2011 openings of 140 restaurants. The openings were in line with the company's previous guidance of 130 to 140 new restaurants in 2011. The company also closed 75 restaurants in 2011.

Estimate Revision

Following the announcement, a positive sentiment has been prevailing around the stock. In the last seven days period, both the analysts covering the stock raised their estimates for the upcoming fourth quarter as well as fiscal 2011.  

Estimate for fourth-quarter 2011 increased 3 cents to reach 24 cents while full year estimate went up to 99 cents from 96 cents in the last seven days period.  

We remain optimistic on the stock of the world's second largest quick-service chicken restaurant chain as it is witnessing solid growth momentum, resulting in an upside in outlook.

AFC currently has a Zacks #2 Rank (short-term Buy rating). We are maintaining our long-term Neutral recommendation on the stock. One of AFC's primary competitors, BJ's Restaurants Inc. ( BJRI ), currently retains Zacks #1 Rank (short-term Strong Buy rating).

AFC ENTERPRISES ( AFCE ): Free Stock Analysis Report
BJ'S RESTAURANT ( BJRI ): 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.

This article appears in: Investing , Business , Stocks
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