Wingstop (WING) shares jumped over 20% on July 28 to close at $119.80 after the company delivered an impressive second-quarter earnings beat and reiterated its FY2022 earnings guidance above analysts’ expectations.
Notably, the easing in commodity inflation, as seen in the 18.8% year-over-year decrease in the cost of bone-in chicken wings, acted as a tailwind.
Based in the U.S., Wingstop is the franchisor and operator of restaurants that engage in the provision of cooked-to-order, hand-sauced, and tossed chicken wings.
WING’s Q2 Numbers
Notably, adjusted earnings of $0.45 per share grew 20.1% year-over-year and beat analysts’ expectations of $0.36 per share. The company reported earnings of $0.38 per share in the prior-year period.
Revenues grew 13.2% year-over-year to $83.8 million but fell mildly short of consensus estimates of $86.1 million.
The top line benefitted from a 7.5% growth in System-wide sales to $633.6 million. Notably, the company reported 67 net new openings during the quarter.
Wingstop Reaffirms FY2022 Guidance & Hikes Store Openings Targets
Although management reiterated the financial guidance for FY2022, what pleased the investors more was an increase in net system-wide restaurant openings from 220+ to between 220 and 235.
The company continued to forecast adjusted earnings in the range of $1.55 per share to $1.57 per share, ahead of the consensus estimate pegged at $1.53 per share. Domestic Same-store sales growth is forecast to be in the low-single-digit.
WING CEO’s Comments
Wingstop CEO, Michael Skipworth, stated, “We are in a unique position for the back half of 2022 where we are benefiting from meaningful deflation in bone-in wings, have a proven playbook, along with sales-driving levers that give us confidence in our ability to deliver on our outlook for 2022.”
Wall Street’s Take on WING
Following upbeat Q2 earnings, Citigroup analyst Jon Tower increased the price target on Wingstop to $145 (21.04 upside potential) from $118 and reiterated a Buy rating.
Tower commented, “WING is one of the few names in restaurants with a clear set of sales catalysts playing out in 2H22/early 2023, conservative guidance, and is the sole concept (to date) where core input prices are materially lower Yr/Yr. This puts this growth stock in rare air for the space.”
The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on nine Buys, seven Holds and one Sell. The average Wingstop price target of $112.41 implies 6.17% downside potential to current levels.
Investors Weigh In on WING
TipRanks’ Stock Investors tool shows that investors currently have a Positive stance on Wingstop, with 1.3% of investors increasing their exposure to WING stock over the past 30 days.
Concluding Thoughts
Although Wingstop shares have lost almost a third of their market capitalization over the past year, it has begun its reversal with the shares being up 57% over the last 30 days.
Investors cheered management’s success in reporting upbeat profits despite higher costs, including labor, rent, and others. Plus, signs of easing in commodity inflation as well as increased store openings going forward added to the euphoria.
