Shares of online food ordering service GrubHub Inc (NYSE:GRUB) are up nearly 20% in trading on Thursday, challenging the January/February highs set by GRUB stock. GrubHub’s big first-quarter earnings beat comes in the wake of a miss in the prior quarter.
The company reported earnings of 29 cents per share, five cents ahead of estimates. Revenues were up more than 39% from last year to $156.1 million versus the $152.9 million analysts were expecting.
Operating income came in at $42.7 million versus the $37 to $42 million guidance. Active diners increased 26% from last year to 8.75 million. Daily user metric — dubbed “Daily Average Grubs” by management — increased 21% from last year on a 26% increase in gross food sales.
Not only are more people using the service, but they’re spending more as well — an incentive for new restaurants to join in.
Grubhub CFO Adam DeWitt had this to say:
“Grubhub’s growth on both sides of our network helped drive DAGs growth of 21% and EBITDA growth of 32% compared to the prior year. We generated significant operating leverage, in part due to our continued improvement in delivery efficiency. As a result, EBITDA per order was up 10% year over year to $1.46, even while we invested aggressively in product and marketing to drive future growth.”
Forward guidance was strong as well, with management looking for second-quarter revenue in the $153 to $161 million, while Q2 adjusted operating income is expected to come in between $38 million and $44 million.
While the results were impressive, the even more impressive GRUB stock price response was a consequence of the large short position resulting in a squeeze for the bears. The move could set up a possible GRUB stock breakout from the post-IPO range with a move above its early 2015 high near $48.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
