Why Shares of Del Frisco's Restaurant Group, Inc. Soared

Is this meaningful? Or just another movement?

Jeremy Bowman
Jeremy Bowman
Apr 29, 2014 at 6:01PM
Consumer Goods

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Del Frisco's Restaurant Group (NASDAQ:DFRG) climbed as much as 10% and finished up 7% after serving up a juicy first-quarter earnings report.   

So what: The parent of restaurants including Del Frisco's Double Eagle Steak House and Sullivan's Steak House said sales improved 11.4% to $66.6 million, just shy of estimates at $67.2 million. Meanwhile, its adjusted profit of $0.21 per share beat expectations by a penny, as comps were strong at Del Frisco's Double Eagle, and companywide, same-store sales improved 1.6%. Investors may have been most excited about the up-and-coming Del Frisco's Grille concept, however, which a consulting firm said could eventually grow to 170 locations from just 11 today.

Now what: The restaurant group operates just 40 restaurants currently, so it could grow many times over if it follows its Del Frisco's Grille expansion plan. For the full year, Del Frisco's expects a same-store sales increase of 1.5% to 2.5% and an EPS of $0.94 to $0.98 against expectations of $0.97. The company plans to open five Del Frisco's Grille locations this year. With such a small store base to grow from, Del Frisco's presents an intriguing opportunity in the restaurant industry. With only five new Grille restaurants this year, its growth will not be explosive, but it could turn into a multibagger over the long term. Keep an eye on same-store sales at Del Frisco's Grille as evidence of its growth potential.