Technology

GrubHub (GRUB) Up 4% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for GrubHub (GRUB). Shares have added about 4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is GrubHub due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Grubhub Incurs Loss in Q2 on Higher Costs & Expenses

Grubhub reported second-quarter 2020 loss of 17 cents per share that beat the Zacks Consensus Estimate by 5.6%.

Notably, the company delivered earnings of 27 cents per share in the year-ago quarter.

Net loss per order in the second quarter was 77 cents against the year-ago quarter’s net income per order of 3 cents.

Revenues surged 41.3% year over year to $459.3 million, beating the consensus mark by 15.4%.

The company’s capture rate, net revenues divided by gross food sales, was 20% and included nearly 50 basis points (bps) from LevelUp and other technology-oriented revenues.

Excluding technology-oriented revenues, Grubhub’s capture rate increased roughly 200 bps on a year-over-year basis.

Markedly, in June, Grubhub announced its acquisition by Just Eat Takeaway.com that will create the largest and only profitable online food marketplace outside of China. Due to the pending acquisition, the company didn’t provide any forward-looking guidance.

Operating Details

Total costs & expenses surged 59.9% year over year to $509.9 million. Operations & support; sales & marketing; technology; and general & administrative expenses grew 96.3%, 26.8%, 2.8% and 25%, respectively.

Markedly, Grubhub spent $15 million during the quarter to ensure consistent and safe delivery operations in response to coronavirus. Moreover, the company spent roughly $100 million in one-time, discretionary costs to support local restaurants and its operations.

Revenues excluding operations and support costs were $2.38 per order, down from $3.16 in the previous quarter.

Adjusted EBITDA plunged 75.7% from the year-ago quarter to $13.3 million. Adjusted EBITDA per order was 23 cents, down from $1.23 in the year-ago quarter and 45 cents in the sequential quarter.

Gross Food Sales & Active Diners See a Spike

Gross Food Sales (GFS) rose 59.4% year over year to $2.3 billion. Average order size increased 20% year over year to $39. Grubhub exited the quarter with an annual GFS run-rate of more than $9 billion.

Active diners were 27.5 million, up 35.4% year over year. The company added 3.6 million net new active diners sequentially.

Daily Average Grubs (DAGs) were 647,100, up 32.4% year over year.

Grubhub now has more than 300K restaurants on its platform, including 225K restaurant partners. Markedly, in the quarter under review, the company expanded relationships with the likes of Burger King, Chipotle, Dunkin’, McDonald’s and Subway.

Balance Sheet

As of Jun 30, 2020, cash and cash equivalents (including short-term investments) were $533.4 million compared with $597.1 million as of Mar 31, 2020.

Long-term debt, as of Jun 30, 2020, was $493.5 million compared with $668.2 million as of Mar 31, 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 6.92% due to these changes.

VGM Scores

At this time, GrubHub has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, GrubHub has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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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.

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