Wingstop Inc. (WING) reported better-than-expected second-quarter results. Shares fell as much as 10% in intra-day trading amid concerns of rising chicken wing prices and closed down 2.2% at $166.11 on July 28. (See Wingstop stock charts on TipRanks)
Adjusted earnings for the quarter grew 13% to $0.38 per share compared to the prior-year quarter and beat analysts’ estimates of $0.33 per share.
Revenue came in at $74 million, up 11.9% year-over-year, and surpassed the Street’s estimate of $73.13 million. Domestic same-store sales grew 2.1% compared to the year-ago period.
Total system-wide sales grew 15.8% to $589.7 million, with 1,624 system-wide restaurants open at quarter-end.
Charlie Morrison, Chairman, and CEO said, “Despite the challenging commodity environment, we had another record quarter for development and have now opened more than 200 restaurants during the last 12 months, highlighting our brand partners’ continued excitement to grow with our brand.”
Even though the company expects wing prices to remain elevated for the rest of the year, it raised its fiscal 2021 guidance for restaurant growth to exceed 12%. Additionally, the company guided for its food, beverage, and packaging costs to be around 44% of company-owned restaurant sales.
Wingstop also announced a hike in its quarterly cash dividend by 21% to $0.17 per share, payable on September 3 to shareholders of record on August 13.
Following the results, Stifel analyst Christopher O`Cull assigned a Buy rating to the stock with a price target of $175, implying 5.4% upside potential.
The analyst believes that Wingstop’s high cash-on-cash returns, significant development potential, and highly franchised business model (98% franchised) bode well for the company’s future growth.
O`Cull said, “Wingstop’s unique flavor profile and customizable menu appeals to a broad demographic, and, based on our consumer survey work, has a significant opportunity to benefit from greater brand awareness.”
Overall, the stock has a Moderate Buy consensus rating based on 7 Buys and 3 Holds. The average Wingstop price target of $170.14 implies 2.4% upside potential to current levels. Shares have gained 6.8% over the past year.
According to TipRanks’ Smart Score system, Wingstop gets a 7 out of 10, which indicates that the stock is likely to perform in line with market averages.
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