Red Robin's Q1: A Positive Surprise For The First Time In Several Quarters

Commenting on Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB)'s nice positive surprise delivered for the first time in several quarters, BTIG said heavy investment in value is yielding results in the firm of same store momentum.

Q1 Review

Analysts Peter Saleh and Ben Parente noted that the company reported first-quarter adjusted earnings per share of $0.89, notably ahead of his estimate of $0.52 and the consensus estimate of $0.57. The analysts attributed the upside to lower SG&A and a higher restaurant-level margin.

On same-store sales, the analysts indicated that the 1.2-percent comp decline was worse than the 1-percent drop they had estimated but better the consensus estimate, which called for a 2.6 percent decline. The upside relative to the consensus estimate, according to the analysts, was due to improved traffic and earlier menu pricing.

"Traffic declined (1.7 percent), an improvement of 120 bps from 4Q16 and an improvement of 170 bps on a two-year stacked basis," the analysts added.

Forward Outlook

While the company revised up its 2017 adjusted earnings per share guidance by $0.10 to $2.80–$3.10, BTIG lifted its estimate to $3.07 from $2.73, citing the first-quarter beat. The firm also raised its 2018 adjusted earnings per share estimate to $3.25 from $3.02, the firm noted.

The form commended the company for the improvement in traffic, which was helped by a change in advertising strategy and a reinforced value message. That said, the firm said it remains on the sidelines, as it thinks the upside came due to lowered expectations and some timing impact rather than organic growth.

"As investors look to the investor day next week, we expect the discussion to focus on building off-premise sales (delivery, curbside pick-up), technology initiatives, development and unit growth update as well as a long-term financial outlook focused on improving ROIC," the firm said.

BTIG has a Neutral rating on the shares of Red Robin.

At time of publication, Red Robin shares were rallying 20.09 percent at $69.65.

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