Can New Promotions Rescue Buffalo Wild Wings?

Throughout most of 2017, shares of Buffalo Wild Wings BWLD faced heavy selling pressures amid a heightened promotional environment, rising chicken wing prices and an activist campaign that resulted in the resignation of its CEO Sally Smith. But shares of Buffalo Wild Wings were trading higher by nearly 20 percent early Thursday morning in reaction to an encouraging third-quarter earnings report.

Stephens: Initiatives Perhaps On The Right Track

Buffalo Wild Wings reported that it earned $1.36 per share in the third quarter, which marks a "strong beat" relative to the 87 cents per share Stephens' Will Slabaugh was modeling. It should be noted that the company realized a 27-cents per share benefit from accrual charges and change in a gift card breakage assumption.

Revenue of $496.7 million was short of the consensus estimate of $501.6 million which implies another quarter of sequential deceleration on both a one- and two-year basis, the analyst said in a research report.

It is possible that the quarter was negatively impacted by uncertainties regarding Smith's resignation and leadership transitions. Yet at the same time the company showed improvements in the management of expenses (COGS, labor, G&A), which resulted in a profitability beat, the analyst also said.

Finally, the shift in the company's Tuesday promotion toward boneless wings is showing early signs of success, the analyst said. Specifically, the restaurant chain did see a loss of traffic, but 50 percent of that came from take-out orders where the average check was less than $10. This has "little impact" to profitability and "likely involves a less desirable guest," although more data on sustained impact to traffic is needed before reaching a conclusion.

Bottom line, management appears to be on the right track in terms of initiatives to drive sales but more clarity is needed before turning bullish on the stock. Slabaugh maintains an Equal-Weight rating on Buffalo Wild Wings' stock with a price target raised from $105 to $115.

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Stifel: Concerns Remain

Buffalo Wild Wings' third-quarter earnings report was "well above" what the Street had expected, and management did boost the mid-point range of its full-year earnings per share guidance, Stifel's Chris O'Cull said in a research report. However, this isn't reason enough to turn bullish on the stock.

O'Cull maintains a Hold rating on Buffalo Wild Wings' stock with an unchanged $115 price target. The earnings report as company and franchise-owned same-restaurant sales continue to be weak and slowed on both a one-and two-year cumulative basis. The poor trend appears to have carried off into the fourth quarter, which is "off to a slow start."

Meanwhile, one of the major overhangs surrounding the stocks, the shift in Tuesday promotion to boneless wings, may "not be fully felt" yet. The company will be raising its prices in November due to wage pressures.

At time of publication, shares of Buffalo Wild Wings were up 16.46 percent at $117.80 in Thursday's pre-market session.

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