Buffalo Wild Wings Fundamental Challenges A Concern, But Shares Reflect Pressures

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Following the release of second quarter results by Bufffalo Wild Wings Inc BWLD, Barclays said the company's fundamental challenges are a concern, but believes the shares reflect such pressures. The firm said it remains intrigued and buyers at current levels, given the turnaround initiatives in place and a variety of shareholder value levels under consideration.

The firm said it expects shares to outperform. The bottom line upside was driven by lower G&A expenses based on lower stock based/incentive comp and a focus on controllables. Barclays also noted that company-operated comps and restaurant margins were below expectations.

Barcalys U.S. restaurant analyst Jeffrey Bernstein noted the 2016 guidance points to earnings per share growth of 14-18 percent to $5.65-$5.85 compared to its long-term target of 15 percent. As opposed to the firm's previous outlook for flat comps by Q2 or Q3 and positive comps in Q4, the company doesn't expect flat comps until the fourth quarter. At the same time, the firm touched upon on some initiatives from the company to arrest the slide in comps, including Fast Break Lunch, value offers and soccer/e-sports. Bernstein sees G&A savings and incremental share repo as offsets.

Barclays indicated Buffalo Wild Wings' comps continue to disappoint. Added to the already challenging sales environment, the firm noted the continued poor showing by comps, which has been negative for two straight quarters, is a concern. The reiteration of the guidance, according to the firm, is aided by G&A savings.

The firm has an Overweight rating on the shares of the company despite its Neutral rating for the industry.

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Posted In: Analyst ColorRestaurantsAnalyst RatingsGeneralBarclays
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