Buffalo Wild Wings Misses Estimates, And No One Seems To Care

Shares of Buffalo Wild Wings BWLD climbed 4 percent in the pre-market hours after its quarterly earnings met the Street view. However, the company’s comps missed the Street's expectations, 2016's EPS guidance was cut and the wing connoisseur guides negative comps for the fourth quarter.

Results, Guidance

Buffalo Wild Wings reported third-quarter EPS of $1.23, in line with consensus. Company-owned same-store sales declined 1.8 percent, below -1.3 percent consensus. The results included 3.4 percent pricing and a 5.2 percent drop in traffic.

Looking ahead, the company now expects 2016 EPS to be slightly below the previous guidance of $5.65–$5.85 on moderately weaker comp outlook and higher wing prices.

For the fourth quarter, the company now sees slightly negative comps versus the previous outlook of flat comps as the weather impact in the October has tempered the outlook.

Analyst Take

But, Wedbush Securities maintains its Outperform rating on the stock as it expects comps to accelerate in 2017 from favorable food costs and expense control, while expecting the EPS to benefit from increased share buybacks.

Analyst Nick Setyan sees 2017 comps benefiting from “half price wing Tuesdays, lunch throughput, online ordering/takeout, marketing, remodels, loyalty, and various technology implementations.”

The analyst noted the company could achieve its 20 percent unit-level margin target by 2018 despite pressure from higher wing prices.

“[C]ost opportunities, including vendor partnerships, leveraging scale for volume discounts, and utilizing automation to reduce waste exist to drive UL margins to 20 percent by 2018,” Setyan wrote in a note.

Further, Setyan believes the company could counter the future labor inflation with improved labor scheduling and server handhelds. 

However, Setyan cut his 2016 EPS estimate to $5.55 from $5.83 and 2017 estimate to $6.89 from $7.00 to reflect the company’s guidance commentary.

The analyst maintains his $180 price target on the shares, which closed Wednesday’s trading at $135.10. In the pre-market hours Thursday, they gained 4.74 percent to $141.50.