On Mar 28, 2014, we issued an updated research report on
Buffalo Wild Wings Inc.
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On Feb 04, this casual dining reported mixed fourth quarter
results with earnings beating the Zacks Consensus Estimate and
revenues missing the same. Adjusted earnings of $1.10 per share
for the fourth quarter grew 23.6% year over year driven by strong
margins due to lower cost of sales. Cost of sales ratio declined
220 basis points owing to lower wing costs.
Total revenue increased 12.4% year over year to $341.5 million
driven by comps and new unit openings. Comps grew 5.2% in the
quarter better than the previous quarter owing to menu price
increases. However, the top line missed the Zacks Consensus
Estimate of $345.0 million by 1.0%.
The company has been consistently posting positive comps for the
past two years. We are encouraged by the company's strong
market standing, new menu launches and increased media exposure.
Buffalo Wild Wings remains better positioned than many of its
peers on the back of menu innovation, better food presentation
and operational efficiency.
Moreover, its association with the NCAA increases its visibility
as a brand. Apart from this, the company also stresses on
advertising initiatives, installing new point-of-sales programs,
improving supply chain management, remodeling initiatives and its
loyalty program to augment sales. We believe these initiatives
will contribute robustly to Buffalo Wild Wings' business in the
In fact, the company expects net earnings growth of 20% in 2014
driven by comps growth and continued operational efficiency. Due
to the decent performance and optimistic outlook, estimates for
both 2014 and 2015 have largely moved upwards over the last 60
However, like other restaurant chains, this Zacks Rank #2 (Buy)
company is also experiencing macroeconomic headwinds. Government
budget cuts, high tax rates and still-tightened credit
availability continue to hurt consumer discretionary spending.
Moreover, Buffalo Wild Wings' limited international presence is a
matter of concern.
Other Stocks to Consider
Some other stocks worth considering in the restaurant industry
Ignite Restaurant Group, Inc.
The Wendy's Company
Burger King Worldwide, Inc.
). While Ignite Restaurant and The Wendy's sport a Zacks Rank #1
(Strong Buy), Burger King Worldwide holds a Zacks Rank #2 (Buy).