One of the market's more resilient eatery chains will get another chance to show that it's still bucking the "restaurant recession" next week. Dave & Buster's Entertainment (PLAY 1.64%) will report fiscal second-quarter results on Tuesday afternoon, and the stakes are high.
Three months ago, the 100-unit chain, which combines casual dining with high-tech arcade gaming, was hitting new share-price highs ahead of its quarterly report, but that's not the case now. Dave & Buster's stock has plummeted 20% since its springtime peak. Strong results for Q2 could get the shares back on the right track, though a blowout quarter wasn't enough to do that last time out.
Image source: Dave & Buster's.
Playing for keeps
Dave & Buster's languishing stock price this summer wasn't the result of a sloppy first quarter. Indeed, the last report was actually well-received, and the stock went on to hit fresh all-time highs on back-to-back days following the Q1 earnings announcement. At least four analysts responded by pushing their price targets higher on the stock, but enthusiasm has since waned. Investors have soured on casual dining chains in general this summer, and Dave & Buster's shares are feeling the pinch.
Wall Street pros are holding out for another period of double-digit percentage growth on both ends of the income statement. Analysts predicted revenue of $282 million for the quarter, 15% ahead of the prior year's showing, and earnings per share of $0.58, up 16% year over year. But if history is any guide, Tuesday's numbers should exceed expectations.
Dave & Buster's share price has more than tripled since the company went public three years ago, and a key to that has been its consistency in surpassing the industry averages. The "eatertainment" chain has beaten the casual-dining segment's benchmark when it comes to comps for 20 straight quarters, and there's little reason to see that streak not hitting blackjack on Tuesday. An equally impressive run is that it consistently beats the analysts' consensus profit targets.
| Quarter | EPS | EPS Estimate |
Surprise |
|---|---|---|---|
| Q3 2014 | ($0.06) | ($0.09) | N/A |
| Q4 2014 | $0.33 | $0.28 | 18% |
| Q1 2015 | $0.46 | $0.37 | 24% |
| Q2 2015 | $0.40 | $0.23 | 74% |
| Q3 2015 | $0.12 | $0.03 | 300% |
| Q4 2015 | $0.53 | $0.43 | 23% |
| Q1 2016 | $0.72 | $0.59 | 22% |
| Q2 2016 | $0.50 | $0.44 | 14% |
| Q3 2016 | $0.25 | $0.14 | 79% |
| Q4 2016 | $0.63 | $0.59 | 7% |
| Q1 2017 | $0.98 | $0.81 | 21% |
EPS = earnings per share. Data source: Yahoo! Finance.
Dave & Buster's has managed to exceed profit forecasts for its 11 first quarters as a public company. It's also been the picture of steadiness, with revenue growth clocking in at between 12.4% and 20.8% in each of those periods, according to data from S&P Global Market Intelligence.
One analyst has asserted that this summer's weakness presents an ideal buying opportunity. Andrew Strelzik of BMO Capital feels that chain is well-insulated from competitive threats, and any near-term hiccups are already priced into the stock. He lowered his price target from $77 to $72, but stuck to his bullish rating on the stock as his new price goal remains about 23% above present levels. Bulls will be hoping that Dave & Buster's keeps its impressive streaks going, and that this time, the chain's performance will be enough to sustain some market enthusiasm.
