Red Robin Beats Zacks Estimates - Analyst Blog

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Casual dining restaurant operator Red Robin Gourmet Burgers Inc. ( RRGB ) reported adjusted earnings of 59 cents per share in the fourth quarter of 2012; way ahead of the Zacks Consensus Estimate of 44 cents as well as the year-ago quarter's earnings of 28 cents per share. Results in the quarter benefited from high traffic and margin expansion. In the full year of 2012, adjusted earnings were $2.06 per share versus $1.58 per share in the prior year.

On a reported basis, in the fourth quarter, earnings were 45 cents per share versus 20 cents per share in the year earlier quarter. In 2012, earnings of $1.93 per share outpaced the prior-year level of $1.34 per share.

The company reported total revenue of $240.7 million in the fourth quarter, up 16.8% year over year and surpassed the Zacks Consensus Estimate of $234 million. For full year 2012, revenues increased 6.8% to $977.1 million year over year.


Quarter Highlights

During the quarter, restaurant sales jumped 16.9% from the year-ago quarter to $236.7 million and franchise royalties and fees revenues were up 15.4% year over year to $4.0 million.

Company-owned restaurants' comparable restaurant sales crept up 1.4% year over year with a 0.3% rise in guest count and a 1.1% increase in average guest check.

Restaurant operating margin enhanced 70 basis-points (bps) to 20.6% at company-owned restaurants, benefiting from a drop in cost of sales and rise in sales mix offsetting increased cost of labor.

General and administrative expenses in the quarter were up 7.4% to $20.5 million. Selling costs amounted to $6.4 million, up 40.8% year over year with the rise in marketing expenses.

Liquidity

Red Robin ended the quarter with cash and cash equivalents of $22.4 million, total outstanding debt of $135.0 million and shareholders' equity of $307 million.

Share Repurchase

The company bought back 281,000 shares worth $8.6 million in the fourth quarter and nearly 803,000 shares at the cost of $24.3 million in 2012.

Store Update

During the quarter, Red Robin unveiled three new units, with one mid-sized prototype restaurant. During the quarter, one franchised restaurant closed in the prior-quarter, was reopened. Red Robin currently operates 339 restaurants, out of which five are Red Robin's Burger Works restaurants and the rest are franchised.

O utlook

For 2013, Red Robin expects comps to grow by 2.5% to 3% with the rise in prices, items sold per guest and higher traffic. Restaurant operating margins are estimated to be 20.7%, consistent or up 10 basis points year over year due to the rise in commodity costs.

General and Administrative costs are projected to be within $83 million and $84 million in 2013. Moreover, the income tax rate is likely to fall between 23% and 24%. Capital expenditures in the year will be in the range of $50 million and $55 million.

The casual dining restaurant operator remains on track to unveil 20 units with five Red Robin's Burger Works to open in 2013.

Our Take

Higher revenues coupled with cost containment efforts and marketing expertise are the driving forces for the company. We remain positive on the stock based on continuous focus on enhancement of shareholders' value and unit growth. However, lower consumer spending amid uncertain economic environment and stiff competition remain headwinds.

Red Robin currently retains a Zacks Rank #1 (Strong Buy). Another restaurateur AFC Enterprises Inc. ( AFCE ) recently declared its preliminary fourth quarter and full year 2012 results. The company projects its adjusted earnings per share for the full year of 2012 to be within $1.23-$1.24, up from 99 cents in 2011. AFC also provided an optimistic outlook for 2013. AFC currently holds a Zacks Rank #2 (Buy).

Other restaurateurs, which are expected to perform well moving ahead, include Krispy Kreme Doughnuts, Inc. ( KKD ) and Burger King Worldwide, Inc. ( BKW ). Both carry a Zacks Rank #2 (Buy).



AFC ENTERPRISES (AFCE): Free Stock Analysis Report

BURGER KING WWD (BKW): Free Stock Analysis Report

KRISPY KREME (KKD): Free Stock Analysis Report

RED ROBIN GOURM (RRGB): 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 The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AFCE , BKW , KKD , RRGB

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