CEC Entertainment Inc. 's ( CEC ) earnings of $1.90
per share in the first quarter of 2013 were 4.5% higher than the
year-ago level. Without the beneficial impact of share repurchase,
earnings were $1.86 per share which beat the Zacks Consensus
Estimate of $1.80 per share by 3.33%. The year-over-year upside in
earnings can be attributed to margin expansion.
Total revenue grew 3.4% year over year to $255.3 million in the
first quarter, which beat the Zacks Consensus Estimate of $250.0
million. Increased revenues can be attributed to higher comparable
store sales (up 1.6%). As much as 37% increase in investment
towards media in the first quarter and implementation of a value
menu boosted comps in the quarter.
The company's cost structure, which includes cost of food,
beverage, entertainment and merchandise, decreased 50 basis points
(bps) year over year to 14.7% as a percentage of company store
sales, mainly due to changes in pricing strategies that were fully
implemented in the fourth quarter of 2012. Also, a decrease in
depreciation and amortization expense, labor expenses and other
operating expenses led to a 110 bps contraction in restaurant
margin to 67.8%.
During the reported quarter, CEC opened one
company-owned store and closed none. On the franchisee front, there
was no opening or closure in the quarter.
At the end of the first quarter of 2013, the company had 515
company-operated stores and 51 franchised stores. For 2013, the
company expects to open 12-15 new company-owned stores and relocate
The company bought back approximately 0.3 million shares of
common stock during the first quarter of 2013 for about $10
million. On Apr 30, 2013, the company's board authorized an
additional $100 million for the stock repurchase plan, bringing the
total to $137 million available for repurchase.
Fiscal 2013 Outlook Upped
For fiscal 2013, the company raised its comparable sales growth
guidance to a range of 1.5%-2.5% from the prior expectation of
1%-2% to reflect the improving sales momentum.
CEC expects earnings per share in the range of $2.80-$2.95, up
from the prior expectation of $2.70-$2.85. The improvement in
guidance was due to expectation for higher comparable store
After reporting year-over-year declines and missing the Zacks
Consensus Estimate for the past two quarters, CEC registered top-
and bottom-line growth and margin expansion this time which we
believe is the high point of CEC's first quarter results. The raise
in 2013 guidance also inspires optimism around the stock. The
company continues to make efforts to increase traffic to enhance
sales and comps, which are attaining fruition.
CEC currently retains a Zacks Rank #1 (Strong Buy). Others
players in the same industry, which look attractive at current
levels include The Wendy's Co. (WEN), The
Cheesecake Factory Inc. (CAKE) and Burger King
Worldwide Inc. (BKW) While Wendy's carries a Zacks Rank #1
(Strong Buy), Cheesecake Factory and Burger King carry a Zacks Rank
#2 (Buy).CEC ENTERTANMNT (CEC): Free Stock Analysis
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