Popeyes Lousiana Kitchen Inc (NASDAQ:PLKI) just served up delicious fourth-quarter results -- so why are shares of the quick-service restaurant chain down 2.5% in Wednesday's after-hours trading?
For one, Popeyes stock had climbed 14% going into the report since Jan. 12, when management released encouraging preliminary fiscal 2014 results ahead of their appearance at the 17th Annual ICR XChange Conference.
Keeping in mind that sales weren't disclosed in those preliminary results, Popeyes stock now finds itself pulling back from all-time highs after the company's official report revealed revenue rose 17.6% year over year to $56.9 million. That performance was helped by an impressive 9.8% increase in global same-store sales, including growth of 10.7% domestically and 4% at international locations. Adjusted earnings per diluted share rose 26.7% to $0.38.
Analysts, on average, were calling for Popeyes to achieve the same earnings on slightly higher revenue of $57.4 million.
For the full 2014 year, revenue climbed 14.4% to $235.6 million, helped by both net restaurant openings of 148 and global same-store sales growth of 6.2%. Full-year adjusted earnings per share climbed 15% to $1.65, or to the higher end of the increased range disclosed in last month's announcement. Once again, Wall Street was looking for Popeyes to achieve the same earnings on slightly higher sales of $236.1 million.
On 2015 and "long-term" guidance
Popeyes also offered a look at what investors can expect not only in the coming year, but also over the course of the next five years.
For fiscal 2015, Popeyes predicts same-store sales growth in the range of 3.5% to 4.5%, as well as net restaurant openings in the range of 115 to 150. Popeyes ended 2014 with 2,379 total restaurants (including 65 company-owned and 2,314 franchised), so that means it plans to increase the size of its base by roughly 5% to 6%.
In addition, Popeyes expects 2015 adjusted earnings per share of $1.83 to $1.88, representing growth of roughly 11% to 14%. That range will be aided by $40 million to $50 million in share repurchases over the course of 2015, compared with buybacks of $40 million in 2014. On Feb. 20, Popeyes' board also approved a multi-year share repurchase authorization of $100 million. By comparison, however, Wall Street was modeling higher 2015 earnings of $1.95 per share.
Finally, Popeyes CEO Cheryl Bachelder elaborated: "Beyond 2015, we envision two investment areas that are intended to accelerate our unit economics and unit expansion-human capital and international. We believe these investments will yield excellent returns to our shareholders over the next five years."
Specifically regarding the "human capital" comment, Popeyes says it's adding a fifth pillar to its strategic roadmap, titled "Develop Servant Leaders," to focus on creating a "culture of servant leadership to improve employee engagement, and, in turn, provide a guest experience as legendary as our food."
For reference, Popeyes' first four pillars include initiatives to build a distinctive brand, create memorable experiences, grow restaurant profits, and accelerate "quality" restaurant openings. If this language sounds a little flowery for your taste, consider this: Popeyes stock has returned nearly 700% over the past five years, indicating that those pillars have served the company and its investors extraordinarily well so far.
Consequently over the next five years, Popeyes believes it can reasonably achieve annualized same-store-sales growth of 2% to 4%, which represents an increase from its previous long-term view for growth of 1% to 3%. That might sound ambitious, but keep in mind that 2014 capped Popeyes' sixth and eighth straight years of positive domestic and international same-store sales growth, respectively. What's more, Popeyes' domestic same-store sales have outpaced both the chicken-QSR and entire QSR categories in each of those years.
Finally, Popeyes is also targeting annual net unit growth over the next five years of 5% to 7%, up from its previous growth target of 4% to 6%. When all is said and done in 2020, Popeyes thinks the execution of its strategic roadmap should enable it to achieve five-year annualized growth in earnings per diluted share of 13% to 15%.
That's not to say Popeyes stock looks "cheap" today relative to that growth. As of right now, shares trade at roughly 35 times this year's expected earnings. But given Popeyes' impressive execution and solid long-term roadmap going forward, it's not hard to argue that the premium is well deserved.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Popeyes Louisiana Kitchen. Try any of our Foolish newsletter services free for 30 days. 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.