Buffalo Wild Wings reports earnings after the close on Tuesday, with a conference call to follow. First Call puts expectations at $0.22 EPS on revenues of just under $78 million. Wall Street has gotten used to the company exceeding estimates for each of the last 3 quarters.
Buffalo Wild Wings has seen nearly a 20% pullback in its stock. The stock was already well off of recent highs on its own, and the market slide last week exacerbated the drop. This one is a bit harder to call on a fundamental basis because shares are still very close to average price targets from Wall Street analysts. Its stock chart is also well outside of its uptrend, and much additional weakness on the chart here would signal that the company may change its name to Bearish Wild Wings.
If the company hits its $1.15 fiscal 2007 consensus earnings estimate, it trades at 34-times 2007 earnings; if it meets the $1.40 estimate for 2008, it trades at almost 28-times 2008 estimates. The big wild card for the company has been its ability to keep material costs down (yep, chicken wings). Of course that isn’t the only component at all since it sells burgers, ribs, salads, sandwiches, wraps and much more. But food prices have been a challenge for all restaurant chains of late, so we’ll have to see how they have fared compared to elswhere in the restaurant chain sector. Regardless of the current and forward P/E ratios sounding high, this one has 450+ locations in 37 states so it still has some room to grow and still have many franchise locations available.
This also carried a short interest of 3.7 million shares in July, but that is under the 4 million shares in June. Many of these high-beta food chains tend to carry a higher short interest as many investors keep bets on for a shortfall that will take them back to normal market multiples. This is also one to watch as Jim Cramer developed a larger following in the stock before cooling to the sector recently, and here is the recent TheStreet.com article pointing to the company.
Jon C. Ogg
July 30, 2007
Jon Ogg can be reached at firstname.lastname@example.org; he does not own securities in the companies he covers.