Tuesday After the Bell: Earnings from Buffalo Wild Wings, DDR, Trulia
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
U.S. equity markets have been off to the races in early 2013, with the best start to the year going back to January 1997. Annual money inflows into stocks have benefitted from a re-entrance of monies that exited the market late last year in anticipation of higher taxes and the fiscal cliff.
Furthermore, investors seem to have put aside the potential for U.S. fiscal policy having an effect on the market, with volatility at multi-year lows. Automatic budget cuts, often referred to as sequestration, are set to take place on March 1 in Washington unless policymakers find a way to avert the current plan.
Not all market participants are ignoring the prospect of a Washington misstep in coming weeks. Dan Greenhaus, chief global strategist at the brokerage BTIG, articulates "Even if we're tired of hearing about the dangers, dismissing them hasn't been a smart thing to do for the past few years.”
The best performing sectors year-to date have been financials, consumer staples, and retail. Financials have led the way with an 8% gain, followed by consumer staples and retail with 7% gains.
While I’ve raised cash in my own portfolio, I continue to follow individual company-specific stories in the market. Here are three names I’ll be following on Tuesday, February 12 following the market close.
Buffalo Wild Wings (NASDAQ: BWLD)
Tuesday, Feb. 12 after market close; EPS $0.95 / Revenue $291.96M
Buffalo Wild Wings is an owner, operator, and franchisor of restaurants featuring a variety of menu items, including its Buffalo, New York-style chicken wings spun in any of its 14 signature sauces or four signature seasonings (description from company website).
The $1.4 billion dollar company is one of the fastest growing restaurant operators in the country. Revenue has grown 31.5% in the last twelve months, while earnings have increased by 14% year-over-year. B-Dubs, as the chain is affectionately called by its patrons, plans to open 60 company-owned restaurants and 45 franchised restaurants during the course of 2013. The company expects its number of restaurants to surpass the 1,000 level this year.
On February 1, KeyBanc analyst Christopher O'Cull upgraded Buffalo Wild Wings to Buy from Hold with an $85 price target. O’Cull believes the current valuation is attractive for new investors and does not anticipate that BWLD will lower their 2013 earnings per share guidance.
In contrast to KeyBanc, Goldman Sachs initiated coverage of Buffalo Wild Wings with a Neutral rating and $82 price target on January 30.
I give more credence to KeyBanc’s O’Cull due to his experience in the restaurant business. Prior to his work at KeyBanc, O’Cull served as an equity analyst at SunTrust Robinson Humphrey for 6 years. In addition, he has four years of experience as Director of Marketing & Finance at O’Charley’s, a major operator in the restaurant industry.
McDonald’s seems to recognize the potential in the chicken wings business, as the world’s largest restaurant chain began selling chicken wings in the Chicago area as a test market in early January. The Associated Press is reporting that chicken wing prices have risen in the past year in part due to increasing demand from restaurants, which is levying the food cost for operators such as BWLD.
In other news, CEO Sally Smith told her hometown Minneapolis/St. Paul Business Journal that the 34-minute Super Bowl blackout was “probably pretty good” for business. The company was expected to sell 8.8 million wings during the game, and given the extension, it probably sold upwards of 10 million. Football season is proven to support the company’s fourth quarter and first quarter results.
DDR (NYSE: DDR)
Tuesday, Feb. 12 after market close; EPS $0.27 / Revenue $206.43M
The Beachwood, Ohio headquartered DDR Corp. operates as a public real estate investment trust (REIT). The company owns, manages, and develops a portfolio of shopping centers, and to a lesser extent, office properties.
The $5 billion dollar company provided 2013 guidance in early January with an expectation for $1.07 - $1.13 in FFO (funds from operations) per share. DDR also highlighted the improved quality of its shopping center portfolio during the 2012 calendar year and the credit rating upgrades it received from Standard & Poor’s and Moody’s.
Shares have risen 22% in the last 12 months excluding the company’s quarterly dividend, which it recently raised to $0.135 per share.
On January 16, JPMorgan upgraded DDR to Overweight from Neutral with a $17.50 price target. The JPM analysts believe the company’s strong investment activity will bode well for operating results in coming quarters. DDR also announced it refinanced $1.2 billion in revolving debt the following day on January 17.
In contrast to Goldman, Jefferies & Co. downgraded DDR to Hold from Buy on January 8, citing valuation and lowering its price target to $17 from $19. I disagree with Jefferies and strongly agree with Goldman, as DDR has improved its financial position and is setting the stage for growth in the next several years.
During my senior year of college, I had the opportunity to interview with DDR CEO Daniel Hurwitz individually for thirty minutes as a candidate for the company's Management Training program. The only reason I mention this is to underscore that I understand DDR’s business model. The company’s headquarters in Beachwood, OH are located in close proximity to Case Western Reserve University.
Trulia (NYSE: TRLA)
Tuesday, Feb. 12 after market close; EPS ($0.02) / Revenue $18.99M
Trulia is a real estate search engine company that directly competes with Zillow, it’s $1.2 billion competitor that is also publicly-traded. The $700 million Trulia went public on September 19 with an initial public offering at $17 per share.
In its brief history as a public company, Trulia reported third quarter results on November 7 when it missed earnings guidance but delivered stronger-than-expected revenue.
Wall Street analysts have been universally bullish on the company since the IPO. The mean (average) price target on the stock is $26, while Needham & Co. has the highest twelve-month target at $28.
Goldman Sachs recently initiated coverage of Trulia on February 7 with a Neutral rating and $25 price target ahead of Tuesday’s earnings call.
Economic Data for Tuesday, February 12
On the economic front, the National Federation of Independent Businesses releases its Small Business Optimism Index on Tuesday at 7:30 a.m.
The International Council of Shopping Centers also releases comparable same-store sales, a key indicator of the health of DDR’s tenant base.
Thanks for reading, and consider subscribing to my posts for more Fool ideas on outperforming the market. Requests for future articles may be sent to email@example.com.
johnmacris has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings. The Motley Fool owns shares of Buffalo Wild Wings. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!