Shake Shack Inc (SHAK) stock is jumping in after-hours trading on Thursday after a first-quarter earnings report that left its haters stunned and silenced.
I’ll admit that I have been one of those haters.
But a great quarter is a great quarter, and on Wall Street the strength of any quarter depends on measuring up to expectations. With SHAK stock up more than 5% in late Thursday trading, we can tell how Wall Street feels about the burger chain’s performance.
It’s all borne out in the numbers, which show a resilient company with sales growth most public companies can only dream of.
SHAK Stock: Momentum Could Return
Shake Shack went public in early 2015, and it didn’t take long for markets to start gobbling it up. Shares nearly doubled from their first-day closing price, soaring to nearly $100 per share within months of its debut. I don’t expect we’ll see that kind of momentum in Friday’s trading, but the Shack’s numbers were pretty impressive across the board.
SHAK stock earned 8 cents per share in the first quarter, double the 4 cents it earned in the year-ago period and meaningfully higher than the nickel per share analysts expected.
More importantly, however, Shake Shack showed that its blistering revenue growth is more sustainable than people thought. Analysts expected revenue to jump 37.7% to $52.06 million in the first quarter; instead, revenue roared 43.3% higher to $54.2 million. That came on “Same-Shack” sales — the company’s cheeky equivalent of same-store sales — that grew by nearly 10%.
The real icing on the cake for SHAK stock owners, however, came in the form of the company’s revised full-year 2016 guidance. Every meaningful metric was higher than the burger chain thought it would be just two months ago.
The New York-based Shake Shack now expects full-year sales to come in between $245 million and $249 million, up from the guidance of between $237 million and $242 million that the company gave in March.
Same-Shack sales also are expected to be meaningfully higher than previously anticipated. This, I think, is a very good sign because while location expansion is nice, SSS growth shows that the company is thinking about what’s going on inside of its stores — an absolutely vital trait for restaurant stocks like Shake Shack.
Specifically, the company expects SSS growth to come in between 4% and 5% in 2016, up massively from the 2.5% to 3% range that Shake Shack expected just months ago. While that’s still down quite a bit from the 13.3% pace Shake Shack posted in 2015, it’s way higher than the anemic 2.5% to 3% growth rate.
In my eyes, if Shake Shack was growing same-shack sales at 3% this year, SHAK stock would be justified to trade in the $20s.
Shake Shack is also opening slightly more locations than it previously guided for, noting it’ll open 16 new company-operated stores in the U.S. this year, up from prior guidance for 13 new stores.
All in all, not a bad quarter for SHAK stock.
Whether these sort of beats can become a regular thing remains to be seen, but for now, there’s reason for investors to rejoice.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
