When Buffalo Wild Wings' (BWLD) CEO Sally Smith told CNBC on Friday that business was booming, she wasn't kidding. Late Tuesday, the company reported blowout earnings and shares rocketed 16% in after-hours trading.
Buffalo Wild Wings reported fourth-quarter earnings per share of $0.73, up 33% from a year earlier and $0.06 above the Thomson/Reuters consensus estimate. Revenue rose 34.5% to $220.5 million -- also above consensus -- and the company posted the fourth straight quarter of accelerating sales growth. Same-store sales at company-owned restaurants increased 8.9% and 5.9% at franchises. In the first six weeks of the first quarter, same-store sales rose 12.9% at company locations and 10.8% at franchises. This is a company that seems to be firing on all cylinders at the moment.
Wait a minute. Didn't a negative Barron's article over the weekend and two downgrades on Monday raise fears about higher input costs -- namely rising wing prices? It brought sellers out in the stock Monday, but the price action wasn't all that bad. It could have been a lot worse. BWLD shares lost 2% in heavy volume, but the stock traded in a tight range for most of the day. On Tuesday, shares bounced back in heavy volume, rising 1.9% to $70.19.
Short interest is relatively high Buffalo Wild Wings. As of Jan. 13, 2.5 million shares were held short. When compared to its average daily of about 500,000 shares, that's a big short position. While yesterday's strong price action is partly due to short-covering, there's probably more to it than that. I wouldn't be surprised at all if mutual fund managers were adding to current positions or establishing new ones. Fund ownership in BWLD has been rising in recent quarters, but at the end of 2011, only 311 funds had a position in the stock. Compare that to Chipotle Mexican Grill (CMG), which is in 878 funds, and Panera Bread (PNRA), which is included in 467 funds. My guess is that it's only a matter of time before more growth managers embrace Buffalo Wild Wing's growth story.
Speaking of Panera, the bakery-cafe chain also reported nice earnings late Tuesday. The company reported profit of $1.42 a share, up 19% from a year ago and in-line with views. Sales rose 16% to $495.8 million, slightly below the consensus estimate of $499 million. Same-store sales rose 5.9% at company-owned bakery-cafe locations and 3.2% at franchises.
Profit-taking hit shares of Panera after the close, which is not surprising since shares had been running higher into earnings. Shares closed Tuesday at $160.02, but the stock was trading around $156 in after-hours. Keep in mind that Panera broke out above $145.46 in mid-January and has been going up ever since. It looks like it's ready to base and consolidate gains for a while.
Meanwhile, the monthly chart of Buffalo Wild Wings suggests that the stock could still be in the early stages of a nice move here. Unlike Panera, good news was not built into BWLD's share price. Some multiple-expansion seems like a good bet at this point for Buffalo Wild Wings. The question is: How much? As of Tuesday's close, the stock was selling at 25x trailing earnings and 22x forward earnings. I won't be afraid to add to my position even if the stock gaps up in price today, which looks like a good bet at this point.
