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Why Buffalo Wild Wings Stock Is Skyrocketing Today

By Steve Symington – Oct 28, 2014 at 1:42PM

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Is Buffalo Wild Wings' pop meaningful? Or just another movement?

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 Buffalo Wild Wings (BWLD) jumped more than 12% Tuesday after the popular restaurant chain announced better-than-expected third-quarter earnings and encouraging forward guidance.

So what: Quarterly revenue rose 18.3% to $373.5 million, helped by a combination of new locations, menu price increases taken over the past year, and comparable-store sales growth of 6% and 5.7% at company-owned and franchised restaurants, respectively. This translated to a 20% increase in earnings per diluted share to $1.14. Analysts were only looking for earnings of $1.07 per share on sales of $373.75 million.

Going forward, Buffalo Wild Wings now sees 2014 earnings growth exceeding 28% over last year, compared to their previous guidance range for earnings growth to exceed 25% and possibly reach 30%. Analysts were technically hoping for earnings to grow by 31.7%, but this narrowed range is much easier for investors to swallow given Buffalo Wild Wings propensity to underpromise and overdeliver. Buffalo Wild Wings also forecast 2015 earnings growth of 18% -- or roughly inline with expectations.

Now what: B-Dubs guidance also comes even as the company has seen traditional wing prices jump more than 30% sequentially to $1.98 per pound. Combine that with impending minimum wage increases in several states, and it's no surprise Buffalo Wild Wings announced it will implement a 3% menu price increase at the end of November. Whether Buffalo Wild Wings has the pricing power to do so without sacrificing same-store sales remains to be seen. But I like its chances given the flexibility it afforded itself last year by implementing a new volume-based wing price structure. For now, B-Dubs' Q3 results were undeniably strong, and I can't blame the market for bidding up shares today.

Steve Symington owns shares of Buffalo Wild Wings. The Motley Fool recommends Buffalo Wild Wings. The Motley Fool owns shares of Buffalo Wild Wings. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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