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Unexpectedly Strong Q4 Growth Sends GrubHub Stock Soaring

By Rich Smith - Feb 5, 2020 at 3:52PM

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Active diner numbers, and revenues, both show greater than expected strength.

After closing the day for a small loss during ordinary trading hours, shares of food delivery service GrubHub (GRUB) bounced hard in after-hours trading, rising more than 5%.

Heading into earnings, analysts had forecast that GrubHub would report about 22.2 million "active diners" using its services in the fiscal fourth quarter 2019, and collect revenues of about $325.3 million. As it turns out, GrubHub did quite a bit better than that.  

Hand bearing platter of sandwiches emerges from a laptop

Image source: Getty Images.

Active diners hit 22.6 million in Q4, up 28% from last year's Q4 and up 7% sequentially from Q3 2019. Revenue rose 19% year over year to $341.3 million.  

The company's internal metric for measuring how often "active diners" are actively using the service, "daily average grubs," or DAGs, increased 8% year-over-year to 502,600. (That's the number of meals the company was delivering from restaurants to consumers on a typical day.)

Despite all this good news, and all this activity, GrubHub still failed to earn a profit for the quarter. Net losses as calculated according to generally accepted accounting principles (GAAP) were $0.30 per diluted share, a loss five times as bad as the $0.06 per share lost in Q4 2018.

For the full year fiscal 2019, active diners increased 28%, DAGS grew 13%, revenues were up 30% (to $1.3 billion) and the net loss was $0.20 per share -- meaning that it was Q4's performance that actually pushed GrubHub into a loss for the year.

Still, investors are treating the news as a win for GrubHub. That's the power of low expectations.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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