Why Red Robin Gourmet Burgers, Inc. Stock Jumped 22.7% in May

The burger restaurant chain jumped after a strong quarterly report.

Steve Symington
Steve Symington
Jun 8, 2017 at 8:31PM
Consumer Goods

What happened

Shares of Red Robin Gourmet Burgers Inc. (NASDAQ:RRGB) climbed 22.7% in the month of May, according to data provided by S&P Global Market Intelligence, after the casual-dining chain delighted investors with solid first-quarter 2017 results.

So what

That's not to say Red Robin's quarter looked stellar on the surface. Revenue rose 4.1% year over year to $418.6 million, as a 1.2% decline in comparable-restaurant revenue was offset by new and acquired locations. That translated to an 18.3% drop in net income to $11.6 million and a 13.6% decline in net income per share to $0.89. But Wall Street, by comparison, was looking for even lower earnings of $0.57 per share.

Naturally, Red Robin stock jumped nearly 20% the following day as investors digested the news.

Red Robin's Burnin' Love burger

IMAGE SOURCE: RED ROBIN GOURMET BURGERS.

Now what

Red Robin CEO Denny Marie Post added that the company has gained share in the struggling casual-dining market, thanks largely to its strategic initiatives to drive sales and traffic. For full-year 2017, Red Robin also now expects earnings per share of $2.80 to $3.10 -- significantly above the $2.76 per share analysts were modeling at the time of the release.

In the end, Red Robin didn't need jaw-dropping growth for its share price to continue to climb. Rather, its rise was a simple case of beating expectations and following with strong guidance. And investors rightly savored every bit of the stock's ensuing gains last month.