Momentum Building At Wingstop; Company Reports Q1 Beat

Wingstop Inc WING reported a first-quarter top-line beat with same-store sales declining less than expected — and Stephens analyst Will Slabaugh expects the firm’s nascent advertising push to drive continued acceleration.

Slabaugh attributed the sales performance to media-perpetuated brand awareness and the fresh leveraging of television and radio. Lower tax rates and a 20.4-percent year-over-year revenue growth also contributed to an adjusted earnings per share of $0.22 above consensus estimates of $0.16. The pop was offset by rising bone-in wings costs and staff expansions.

First-quarter results were also propelled by a plus-70 basis-point tailwind over Easter weekend.

Flying Forward

Looking ahead, potential catalysts include the company’s exploration of third-party delivery systems currently piloted in Las Vegas.

“Although our thoughts are mixed on the profitability of third-party delivery in general, we would favor a to-go focused concept such as WING exploring it as likely meaningful driver of sales,” Slabaugh wrote. “We were also pleased to hear WING speak to prioritizing value and food quality before making a decision on delivery’s implementation.”

Stephens posted annual same-store sales estimates of 1.3 percent, EPS of $0.68 and a $34 price target, despite the firm’s expectation of a negative-70 basis-point headwind in the second quarter.

“More broadly, we continue to view WING as a best-in-class concept with an attractive return profile that is well-positioned to re-accelerate SSS and franchised unit growth and likely offer a 10-percent one-time dividend within the next 12 months,” Slabaugh wrote.

At the time of publication, Wingstop was trading around $32.60 — up 12.4 percent.

Stephens has an Overweight rating on the company with a $34 price target, raised from a previous target of $32.

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