Buffalo Wild Wings (NASDAQ:BWLD) is slated to release its fourth-quarter 2016 results on Feb. 7, 2017. But that didn't stop the wings, beer, and sportscentric restaurant chain from offering a massive vote of confidence to investors ahead of time.
More specifically, B-Dubs' board of directors just authorized a $400 million increase to the company's share repurchase program.
To put it into perspective, this incremental $400 million represents roughly 15.6% of Buffalo Wild Wings' total float, and increases the size of the company's cumulative repurchase authorizations by 80%, to $900 million.
In addition, Buffalo Wild Wings announced it is advancing its goal to achieve a leverage ratio target of 1.5 times debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of fiscal 2017. As of last quarter, it was aiming to achieve the same leverage ratio target by the end of fiscal 2018.
What it all means
"The additional share repurchase authorization and accelerated timing of our targeted leverage ratio reflect our focus on rebalancing our debt and equity to optimize our cost of capital," added Buffalo Wild Wings CEO Sally Smith. "Our confidence in our company's growth and cash flow generation potential allows us to meet our commitment of delivering value to all Buffalo Wild Wings shareholders."
That doesn't mean Buffalo Wild Wings still has that entire $900 million at its disposal. The company also confirmed it repurchased 827,639 shares of common stock in the fourth quarter for approximately $127 million -- which equates to an average price of roughly $153.45 per share -- leaving $242 million remaining under its previous authorization as of Dec. 25, 2016. Assuming Buffalo Wild Wings hasn't repurchased additional shares since then, that leaves a whopping $642 million remaining for the company to continue repurchasing and retiring shares.
To be fair, Buffalo Wild Wings stock is trading just above $150 per share as of this writing -- below the cost of its Q4 repurchases. But if its latest approval is a harbinger of good things to come, it could mean investors today are being presented with a compelling buying opportunity.
But this also raises the question: Is Buffalo Wild Wings poised to beat expectations when it reports tomorrow?
It wouldn't be entirely surprising in light of recent events and B-Dubs' business momentum. Recall that while last quarter marked the company's third straight quarter of decreasing comparable-restaurant sales, for example, those declines appeared to be finally moderating and potentially on the upswing.
What's more, shares of Buffalo Wild Wings jumped more than 15% following last November's U.S. presidential election, as investors speculated that the combination of the new administration's proposed tax cuts and lax approach to raising minimum wages could be great for the casual dining industry.
We should note the company doesn't typically provide formal financial guidance on a quarterly basis. But during its latest quarterly conference call in late October, management did tell investors that traditional wing prices were significantly higher than anticipated during the early part of the fourth quarter. This meant that Buffalo Wild Wings would likely come in below the low end of its prior full-year 2016 earnings guidance range of $5.65 to $5.85 per share.
So, for additional perspective -- and while we don't typically pay close attention to Wall Street's demands -- analysts' consensus estimates predict fourth-quarter revenue will climb around 5.1% year over year, to $515.2 million, and translate to quarterly earnings of $1.27 per share. That would bring full-year earnings to $5.51 per share.
We'll know whether Buffalo Wild Wings meets or exceeds those estimates with its report tomorrow after the market closes. If it doesn't and shares fall, the company has the approval to potentially take advantage of any pullback. But if it does beat expectations and shares continue to climb, we can't say Buffalo Wild Wings didn't give investors a chance to follow its lead.