What happened

Shares of GrubHub Inc (NYSE:GRUB), the country's leading online takeout marketplace, sold off today after an otherwise strong first-quarter earnings report was marred by weaker-than-expected order growth. As a result, the stock was down 9.9% as of 11:53 a.m. EDT.

A man holds a smartphone with a food delivery app open

Image source: Getty Images.

So what 

The parent of brands like Seamless, Eat24, and MenuPages posted a generally strong report as revenue increased 49% to $232.6 million, which topped estimates at $229.3 million, helped by GrubHub's recent acquisition of Eat24 from Yelp 

Gross food sales were up 39% to $1.2 billion, and active diners jumped 72% to 15.1 million as the company absorbed new customers from its acquisitions of Eat24 and Foodler. Daily Average Grubs (DAGs), or orders, increased 35% to 436,900, which seemed to disappoint the market as analysts had expected 442,800 DAGs. 

On the bottom line, meanwhile, the company continued to build leverage as adjusted earnings per share surged 88% to $0.52, well ahead of estimates at $0.38. GrubHub CEO Matt Maloney said, "Our team executed well in the first quarter, making meaningful progress toward our most significant goals for 2018. We've already launched dozens of new delivery markets, completed our Yelp and Eat24 integrations a quarter earlier than expected, and attracted a record quarterly number of organic new diners."

Now what 

The sell-off, which seemed to be due only to disappointing DAG growth, was puzzling -- company management said that organic DAG growth, which factors out acquisitions, accelerated for the second quarter in a row, and that it lost some Eat24 orders as it cut down on couponing for the brand, which cost the company orders but added to revenue and profits.

Overall, this was another impressive quarter from the leading online takeout marketplace. The stock has surged over the last year; shares have more than doubled over that time even with today's slide, so perhaps it was due for a correction. With GrubHub executing on its new partnerships with Yum! and Yelp and growing organically, the company's growth story keeps getting more appealing. In spite of the sell-off, there's little reason for investors to be disappointed in the latest round of results.

 

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Grubhub and Yelp. The Motley Fool has a disclosure policy.