Wedbush Sees Wingstop's Special Dividend As A Recurring Event

Wingstop Inc WING reported a fourth-quarter EPS beat against lowered expectations. The company’s Q4 and Q1 quarter-to-date comps reflect the impact of industry headwinds.

“We view Wingstop as a unique concept poised to grow FCF [free cash flows] at a rate well above peers over the long-term,” Wedbush’s Nick Setyan said in a report. He added that the company’s recurring special dividends would drive “increased appreciation of Wingstop's unique business model.” Setyan maintains an Outperform rating and price target of $36 on the stock.

Comps Performance

Wingstop reported Q4 same store sales growth at 1.0 percent, versus consensus expectations of 3.5 percent. Adjusted EPS came in at $0.15, marginally higher than the consensus estimate of $0.14.

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The company’s Q1 QTD comps are down 2.6 percent. The 2017 guidance of low single-digit domestic SSS growth would result in consensus expectations being lowered significantly from the current 3.7 percent estimate, Setyan mentioned. He expects Wingstop’s SSS growth to normalize to around 2–3 percent for the remainder of the year, driven by “national TV advertising, shift to digital, and the natural maturation cycle of new units.”

Special Dividends To Continue

“We believe Q2:16's recapitalization and payment of a special dividend is poised to become a recurring event as the company pays down debt over time. We continue to estimate the next special dividend could be as high as $4.50/share and be paid by the end of 2018,” the analyst wrote.

In the after-hours session Thursday, Wingstop shares were down 6.79 percent at $24.84.