Please ensure Javascript is enabled for purposes of website accessibility

Grubhub Serves Up Another Four-Star Quarter

By Jeremy Bowman - Feb 8, 2018 at 5:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Sales and profits surged for the online takeout marketplace, and the company announced a new partnership with Yum! Brands.

Grubhub (GRUB) already had plenty to celebrate coming into its fourth-quarter report. The stock jumped 91% last year, by far its best performance since going public in 2014 as the restaurant takeout marketplace made savvy moves like forming a strategic partnership with Yelp and acquiring Eat24 from the review platform as well as making other smaller acquisitions. Over the year, the company also delivered strong revenue and profit growth as it gained scale, leveraged its new delivery business, and defended itself against threats from the likes of and Uber.

Its fourth-quarter report on Thursday did not disappoint. Shares soared 27% on Thursday as the company posted strong top- and bottom-line growth and announced a new partnership with Yum! Brands (YUM -0.93%).

A person prepares to order food on their smartphone.

Image source: Getty Images.

Grubhub results: The raw numbers

Metric Q4 2017 Q4 2016 Year-Over-Year Change
Sales $205.1 million $137.5 million 49.2%
Adjusted net income from continuing operations $33.3 million $19.8 million 68.2%
Adjusted earnings per share $0.37 $0.23 60.9%
Active diners 14.5 million 8.2 million 76.8%

Source: Grubhub.

What happened with Grubhub this quarter?

Growth surged after the company closed on its acquisition of Eat24 in October, which explains the jump in active diners. But the company also made strides organically as its delivery business ramped up to an annualized run rate of $1 billion after the company launched it in 2015. Providing delivery services for restaurants has been a huge growth driver for the company. Leveraging other recent acquisitions, like Foodler and OrderUp, also helped boost growth in the quarter.

Grubhub has captured an expanding market opportunity with the number of restaurants the company works with doubling to 80,000 in the past two years.

The partnership with Yum! Brands was the biggest news of the quarter as the parent of KFC, Taco Bell, and Pizza Hut will purchase $200 million of stock in Grubhub and Grubhub will be Yum!'s only national partner in online ordering for KFC and Taco Bell. The two companies will undertake joint marketing initiatives to drive awareness of the new ordering platform. Yum! expects it to add incremental sales, while Grubhub thinks it will boost volume across all its restaurants as it gains awareness in smaller markets. Pizza Hut U.S. President Artie Starrs will also join Grubhub's board as part of the agreement.

What management had to say

Grubhub management touted the new deal with Yum! Brands and how it would drive further growth and awareness for the company. CEO Matt Maloney was quoted as saying in a company press release that it would "accelerate the expansion of our delivery network and amplify our diner acquisition efforts, raising consumer awareness of online ordering and driving more volume for all restaurants across our platform."

Management also said it would continue to focus on the U.S. market, which is growing quickly as people move from paper menus to online ordering. The company now believes the value of the takeout and delivery market in the U.S. is $200 billion, up from a $75 billion estimate in 2014. Grubhub recorded $3.8 billion in gross food sales last year, showing there's plenty of room in the market.

Grubhub also highlighted the strength of its delivery service as CFO Adam DeWitt was quoted as saying in a press release that "Grubhub delivery has helped drive phenomenal growth for us ... Our ability to scale delivery capabilities efficiently, combined with consistent execution on organic diner acquisition and merger integrations, enabled us to generate record EBITDA per order of $1.58 in the fourth quarter." The company plans to expand delivery in the 80 markets where it now offers it and launch more than 100 new delivery markets this year.

Looking forward

With another quarter of strong growth under its belt, as well as the momentum from the Eat24 acquisition and the new Yum! Brands deal, Grubhub looks primed for continued growth into 2018. Management forecast first-quarter revenue of $224 million to $232 million, representing 46% growth at the midpoint, and revenue of $910 million to $960 million for the year, up 38% from 2017. The company is also expecting a modest acceleration in adjusted EBITDA growth to $225 million to $255 million for 2018, 30% higher than last year. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GrubHub Inc. Stock Quote
GrubHub Inc.
Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
$115.62 (-0.93%) $-1.09
Yelp Inc. Stock Quote
Yelp Inc.
$28.20 (1.22%) $0.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.