Red Robin Gourmet Burgers Inc. ( RRGB ) was down about 21% in pre-market trading after second quarter revenue and net income missed analyst expectations. Red Robin then proceeded to trade sharply lower in Thursday's session, finishing the day lower by 18.5%.
Red Robin revenue for the second quarter of 2014 was reported as $256.1 million, an increase of 7.5% from last year. As a percentage of restaurant revenue, restaurant-level operating profits declined to 22.2% from 23.3%. The company reported comparable restaurant revenue increased 1.2%, though net income was $9.5 million compared to $11.1 million for the same period a year ago.
Adjusted earnings per share were reported as $.68 per share, a big miss from the Zacks Consensus Estimate of $.90 and down from last year's reported $.77 per share. Restaurant-level operating profit margins are expected to be 21.3%.
"Although we are satisfied with our top line performance through the first half of the year, we were disappointed that our marketing efforts in the second quarter did not produce the desired results in an intensely competitive environment," said Steve Carley, Red Robin Gourmet Burgers CEO.
As previously announced on July 14, 2014, the Company completed the acquisition of 32 franchised restaurants in the U.S. and Canada and generates approximately $90 million in annual revenue this year and estimating $44 million for the second half of the year.
The company plans to open 20 new Red Robin restaurants and four to five Red Robin Burger Works resulting in operating week growth of approximately 6.5% for fiscal year 2014.
Red Robin missed this quarter on both top-line and bottom-line estimates, but Red Robin is a concentrated business within a competitive industry that has a positive outlook for the future. For the year, Zacks Consensus Estimate calls for an EPS of $2.83 for the fiscal year of 2014, and an EPS of $3.38 for fiscal year 2015. Red Robin has beat the Zacks Consensus Estimate for the previous four quarters with an average surprise of 13.15%, indicating longer-term consistency for beating estimates, despite this miss.
We currently rank Red Robin as a Zacks Rank #3 (Hold) and we have Red Robin with an industry rank in the bottom 26% of all industries. This downswing in this cyclical stock could be an opportunity for investors to buy the stock at a discount from its 52 week range, though both the industry rank and recent earnings performances from the quick service industry have been very poor as of late so definitely take a cautious approach.
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