Shares of Wingstop (WING 3.42%) were elevating again this week after the fast-casual chicken chain posted better-than-expected results in its third-quarter earnings report on Wednesday.
The company easily beat estimates on the top and bottom lines while comparable sales soared. According to data from S&P Global Market Intelligence, Wingstop stock was up 11% for the week through Thursday's close.
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Wingstop can't be stopped
Wingstop has quietly been one of the fastest-growing restaurant stocks in recent years, and the company showed no signs of slowing down in its third-quarter earnings report.
Domestic same-store sales rose 15.3%, primarily due to transaction growth, showing that the chain is attracting more customers and driving customer frequency. Systemwide sales, which measure sales at the unit level at all of its restaurants, including those owned by franchisees, jumped 26.5% to $885 million as it continues to expand and benefits from strong same-store sales growth.
Revenue rose 26.4% to $117.1 million, which was well ahead of the analyst consensus of $108.7 million.
On the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were up 36.7% to $38.5 million, and adjusted earnings per share jumped 53.3% to $0.69 ahead of analyst expectations at $0.51. Average unit volumes, a key strategic initiative for the company, improved from $1.591 million in the quarter a year ago to $1.755 million, and it added 201 restaurants in the last year, with the vast majority being domestic franchised locations.
CEO Michael Skipworth said, "We are measuring record levels in brand health metrics, demonstrating the underlying momentum at Wingstop, and putting us on a path to deliver our 20th consecutive year of domestic same-store sales growth." Twenty years of comparable sales growth is an impressive feat for any restaurant, especially considering challenges like Covid and the 2008 financial crisis.
Wingstop shares have risen every day this week, though the bulk of the gains came Wednesday on its earnings report. Stocks rose broadly on Thursday on signs that the Fed could be done raising interest rates, which would benefit Wingstop and other consumer discretionary stocks.
Is Wingstop a buy?
Looking ahead, the company raised its same-store sales guidance from between 10% and 12% to 16% and also raised its forecast for selling, general, and administrative expenses from $91 million to $93 million to $94.5 million to $95.5 million, likely reflecting a desire to invest in the growth opportunity in front of it.
Wingstop, which does most of its business through pickup and delivery, proved to be a winner during the pandemic and has reported strong results since then. The stock is expensive, but double-digit comparable sales growth can quickly drive profits higher. If it can maintain that pace, the stock could easily move higher from here. The guidance hike should assure investors that the business doesn't see any signs of slowing down for now.
