For Buffalo Wild Wings (BWLD), It’s All About Boneless

Buffalo Wild Wings (Nasdaq: BWLD) investors may need to brace themselves for some disappointing numbers in the company’s third-quarter earnings report expected out in late October. However, Oppenheimer analyst Brian Bittner says the restaurant chain’s management team is steering the ship in the right direction headed into 2018.

According to Bittner, higher chicken wing costs will likely prompt Buffalo Wild Wings to cut its full-year 2017 earnings guidance in October. Oppenheimer is modeling full-year earnings per share of $4.18, well below the company’s current guidance of between $4.50 and $5 per share. Oppenheimer’s estimate is also well short of the current analyst consensus estimate of $4.52.

Oppenheimer is forecasting a 2.5 percent decline in same-store sales in the third quarter, below consensus expectations of a 2 percent decline. Bittner estimates that the hurricanes in Houston and Florida impacted up to 8 percent of co-owned restaurants. A 10 percent decline in Houston and Florida sales could impact third-quarter EPS by 2 cents and 4 cents, respectively.

Yet despite all of the company’s near-term issues, Bittner is optimistic about Buffalo Wild Wings’ outlook for 2018 given management’s recent decision to pivot from its low-margin half-price Tuesday wings promotion to its higher-margin boneless wings promotion. Oppenheimer estimates this transition could boost full-year EPS by up to $2 if executed properly.

“If this improving earnings dynamic … is merged with the installment of a new operationally strong management team, BWLD’s valuation … and earnings model could soon present investors with a more attractive risk-reward into next year,” Bittner says.

In the meantime, Bittner says Buffalo Wild Wings has a lot to prove, even with the stock currently trading at a discounted earnings before interest, tax, depreciation and amortization multiple of only about 7.4.

“Despite lowering EPS estimates through ’18E, the risk-reward at 7.4 times EBITDA into next year is starting…

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