Maxim Lifts Buffalo Wild Wings To Buy, Maintains $217 Target

• Buffalo Wild Wings BWLD shares have risen steadily since July 24, when they touched a low of $168, and are up 11 percent in the last three months.
• Maxim Group’s Stephen Anderson upgraded the company from Hold to Buy, while maintaining a price target of $217.
• Reduced operating and food costs, along with solid unit expansion and robust same-restaurant sales growth, are expected to boost the company’s EPS growth in 2016 and 2017, Anderson said.

Buffalo Wild Wings is expected to record an EPS growth of 20-25 percent in 2016 and 2017. The company’s earnings are likely to be driven by a combination of “mid-single-digit same-restaurant sales growth, solid unit expansion, a retreat in food costs led by a drop in average wing costs, and reduced operating costs as a percentage of sales,” analyst Stephen Anderson mentioned.

Buffalo Wild Wings’ top-line growth is expected to be driven by value pricing and compelling limited-time promotions, incremental sales gain from remodeled units and the summer Olympics in 2016. Buffalo Wild Wings’ Blazin’ Rewards loyalty program, scheduled to be launched in early 2016, is also expected to boost earnings, the Maxim Group report stated.

Anderson believes that easier year-over-year comparisons on labor costs would provide the additional boost for margin expansion. He added, “We also regard the rollout of tabletop tablets as a potential positive for BWLD in terms of margins and estimate that the introduction of tablets will produce annualized operating margin upside of as much as 20 bps.”

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