After a hot IPO in 2013,
Noodles & Company
) is showing the growing pains of being a public company. This
Zacks Rank #5 (Strong Sell) recently gave 2014 guidance which
disappointed the Street.
Noodles & Company operates in the "fast-casual" restaurant
sector. It operates 380 restaurants in 29 states and the District
of Columbia. The fast-casual restaurants have been a hot niche of
the restaurant industry.
Duh, It's the Weather
Noodles & Company reported preliminary sales data well ahead of
its Feb 26 earnings date so the comparable restaurant sales gain of
3.9% was priced in.
But it was the 2014 guidance that spooked investors and analysts.
And like a lot of companies that have exposure to the Midwest and
the Northeast, it was all about the weather.
"Looking ahead to 2014, we have faced an unusual amount of severe
winter weather during the first quarter to date. Nearly 80% of our
restaurants are located in areas severely impacted by atypical
weather, including the Mid-Atlantic, Upper Midwest and Rocky
Mountain West," said Kevin Reddy, Chairman and Chief Executive
"In fact, over 30% of our operating days thus far have seen either
measurable precipitation or temperatures at least twenty degrees
"As a result, in the first quarter we anticipate a roughly 300 to
350 bps negative impact to revenue and $0.03 impact to diluted
earnings per share. Still, we remain confident that we can deliver
on our 25% annual adjusted diluted earnings per share growth goal
for 2014," he added.
Estimates Lowered for 2014
Expectations have been high coming out of the IPO. It didn't take
much to knock the shares back.
Since Feb 26, 5 estimates have been lowered for 2014 pushing down
the Zacks Consensus to $0.51 from $0.55 just 90 days ago.
It is still a growth story, however. Earnings are expected to grow
26.7% in 2014 and another 27.8% in 2015.
Shares have fallen 18% over the last 6 months and are well off
their IPO high.
But that doesn't mean that Noodles & Company is now a deal.
Shares are still expensive, trading with a nose-bleed forward P/E
of 73. If you must buy a stock in the restaurant industry, take a
look at juggernaut
Chipotle Mexican Grill
) instead. It's a Zacks Rank #2 (Buy) stock and its valuation is a
little more reasonable at 45x.
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CHIPOTLE MEXICN (CMG): Free Stock Analysis
NOODLES & CO (NDLS): Free Stock Analysis
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