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Noodles & Company (NDLS) Stock Up Despite Q2 Earnings Miss


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Noodles & CompanyNDLS reported mixed results in the second quarter of 2018, wherein earnings missed the Zacks Consensus Estimate while revenues surpassed the same.

Adjusted earnings of a penny missed the consensus mark of 3 cents but remained flat with the year-ago quarter's EPS. Meanwhile, revenues of $117.4 million surpassed analysts' expectation of $114.8 million by 2.3% and also grew 4.1% year over year. Revenue growth was primarily driven by an increase in comps, partially offset by impact of restaurant closure.

Noodles & Company Price, Consensus and EPS Surprise

Noodles & Company Price, Consensus and EPS Surprise | Noodles & Company Quote



The company's second-quarter numbers depict increased momentum from the execution of different strategies. Newly launched zucchini noodle helped the company gain increased traffic and comps in the quarter. The company increased its outlook for 2018. Therefore, despite earnings miss, shares of Noodles & Company jumped 4.6% in after-hours trading on Jul 18. Also, shares of the company have gained a whopping 175.6% in the past year, outperforming theĀ  industry 's growth of 2.4%.


Let's delve deeper into the numbers.

Comps Discussion

In the second quarter, Noodles & Company's system-wide comps increased 5.4% against adecline of 0.2% in the first quarter. Company-owned and franchise restaurant comps also increased 5% and 8% versus decline of 0.3% and 0.9%, respectively, in the first quarter.

Comps in the quarter were favored by an increase in traffic, resulting from the company's successful implementation of various operational and brand initiatives at a modest price rise.

Costs & Margins

Total costs and expenses in the second quarter increased 7%, partially owing to a 5% rise in the cost of sales and 4.4% increase in labor expenses. Total expenses were partially favored by a sharp decline in pre-opening costs.

Restaurant contribution margin was 15.5% in the second quarter of 2018 compared with 15% in the second quarter of 2017, reflecting an increase of 50 basis points. This increase is attributable to leverage on higher average unit volumes during the second quarter of 2018.

Balance Sheet

Total current assets as of Jul 3, 2018 are roughly $23.1 million, up from $22.1 million on Jan 2, 2018. Long-term debt in the second quarter came in at $62.7 million, up from $57.6 million in the fourth quarter of 2017.

Total stockholders' equity as of Jul 3, 2018 totaled $26.2 million, down from $35.9 million on Jan 2, 2018.

First-Half 2018 Revenues

In the first two quarters of 2018, total revenues declined 0.7% year over year to $227.9 million. This decrease was primarily due to the impact of closing 55 company-owned restaurants in the first quarter of 2017, partially offset by increase in comps and additional restaurant openings since the beginning of 2017.

System-wide comps in the first half of 2018 increased 2.7%, including a 2.4% increase for company-owned restaurants and 4.5% for franchise restaurants.

Raised 2018 Outlook

The company expects EPS within break-even earnings to 3 cents, higher than the previous guided range of a loss of a penny to earnings of 3 cents. Restaurant contribution margin is expected in the range of 14.5-15.5%, up from prior expectation within 14.5-15%. Total revenuesare expected in the range of $450-$455 million, up from the previously anticipated band of $440-$450 million. Comps in 2018 are expected to be up 2.5-3.5%.

Zacks Rank & Peer Releases

Currently, Noodles & Company carries a Zacks Rank #2 (Buy). You can seeĀ  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Darden DRI reported better-than-expected results in the fourth quarter of fiscal 2018 . Adjusted earnings of $1.39 per share beat the consensus estimate of $1.35 by 3%. Earnings increased 17.8% year over year on the back of higher revenues.

Sonic SONC reported mixed results in the third quarter of fiscal 2018 , wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of 52 cents outpaced the consensus estimate of 49 cents and also increased 20.9% on a year-over-year basis. The reported figure incorporated benefits of the lower tax rate. Excluding the impact of tax reform, the bottom line increased 7%.

Upcoming Peer Release

McDonald's MCD is slated to report second-quarter 2018 results on Jul 26.

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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 , Earnings , Stocks
Referenced Symbols: SONC , MCD , DRI , NDLS



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