This column is part of our Best Stocks for 2016 contest. Charles Payne’s pick for the contest is Buffalo Wild Wings (NASDAQ:BWLD).
The last time we spoke about my pick in the Best Stocks for 2016 contest, BWLD stock had just taken a hit after reporting disastrous first-quarter earnings.
The good news is Buffalo Wild Wings stock has rebounded off its lows, but with another earnings report coming up July 26, Wall Street’s eyes are firmly back on execution and results will go a long way in determining how BWLD stock will finish out the year.
Before we talk about that, let’s first recap why I chose this stock in the first place.
Buffalo Wild Wings is an owner, operator and franchisor of sports-themed restaurants that feature wings, beer and other bar fare. What started out as a single restaurant in Columbus, Ohio in 1982 has turned into an empire of over 1,080 stores spread out across the United States, Canada, Mexico and the Philippines. And the coolest part about those restaurants? Each location has a minimum of 50 televisions.
BWLD stock had been a runaway success over the last dozen years, rallying 786% from its January 1, 2009 open to its high point nearly a year ago in July 2015.
After a slow finish to last year, I had been expecting a turnaround in 2016, but BWLD’s surprisingly weak first-quarter report brought to light an array of issues that begin with management coming up short and end with a lack of major sporting events and price concerns.
BWLD Stock Needs Strong Earnings
However, it’s the inability to execute that hurts the shares the most.
The company earned $1.73 a share on the bottom line, which was below estimates of $1.76 a share, and revenue of $508.3 million was also short of expectations of $532.2 million. Guidance for the year was also off, with management forecasting earnings of $5.85 a share while the Street had been expecting $6.10 a share.
Same-store sales and average weekly sales were also down, although same-store sales at franchise-owned stores increased 2.4%.
The stock tumbled the following day to a 52-week low of $122.25, which is a level BWLD hadn’t seen since October 2014. The shares have since rebounded, but are now struggling to hold above the 50-day moving average.
This is a critical time for the stock that hinges on its next earnings report.
For the current quarter, the Street is looking for BWLD stock earnings to come in at $1.27 a share to represent 13% growth year over year. Revenue should increase 17% over the previous year to $498.86 million. Those are decent numbers that could come in even higher, as analysts haven’t adjusted their estimates since the NBA Championship went to Game 7 and brought in viewing numbers not seen since the glory days of Michael Jordan.
Management can thank Stephen Curry and Lebron James.
Buffalo Wild Wings was once a juggernaut, but the C-suite seems to have lost its touch. I find it interesting that management is now focusing on things like soccer matches. It’s a smart move, albeit a little late.
We knew going in that BWLD carried extra risk given last year’s earnings misses, and from here, we need to see a beat this quarter in order to get this stock moving again.
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