Q4 Casual Dining Cage Match: Texas Roadhouse Vs. Red Robin

Against a challenging restaurant environment, Texas Roadhouse Inc TXRH and Red Robin Gourmet Burgers, Inc. RRGB announced weak Q4 same-store sales. Both companies should generate better results in fiscal year 2017, Stephens’ Will Slabaugh said in a report.

Slabaugh has the price target for Texas Roadhouse at $48 and that for Red Robin at $75, with Overweight ratings on both companies.

Texas Roadhouse

The company reported company-owned SSS at +1.2 percent, versus the consensus expectation of 3.2 percent. Adjusted EPS for the quarter came in at $0.29, missing the consensus estimate of $0.38.

“On the bottom line, wage rate inflation and higher costs associated with payroll taxes and insurance adjustments more than offset continued beef favorability,” Slabaugh noted.

Texas Roadhouse indicated that its quarter-to-date SSS had tracked up 1.5 percent, versus the consensus projection of 3.1 percent for the first quarter. The company guided to positive SSS for FY 2017, with mid-single-digit labor inflation, food cost deflation of 1–2 percent and the opening of 30 company restaurants, including six Bubba's.

Related Link: Highlights From 3 Restaurant CEO Chats With CNBC

Red Robin

The company reported its SSS down 4.3 percent, with a 2.9 percent decline in traffic. This came in marginally better than its preannouncement. EPS was recorded at $0.35, ahead of consensus expectations of $0.29.

For FY 2017, Red Robin guided to EPS of $2.70–$3.00 and adjusted EBITDA of $145–$150 million, versus the consensus expectations of $2.88 and $146 million, respectively. The comp guidance for the year also came ahead of expectations, at 0.5–1.5 percent. The analyst expects the company’s comps growth to be “somewhat back-half loaded.”

“The soft quarter was widely expected after its presentation at January's ICR conference and pre-release, though we were encouraged to see the FY 2017 guide above the Street, which we believe was well above buy side expectations,” Slabaugh wrote. He added that Red Robin would likely generate “material appreciation” through traffic improvements and cost cuts under its new CFO.

At Last Check

• Shares of Red Robin were up 7.16 percent in Wednesday's pre-market session, seen at 50.90.
• Texas Roadhouse shares were seen down 10 percent at $43.01.