Thursday, November 7, 2013

Overcooked Noodles & Co. Plunges on Revenue Miss

What happens when noodles gets overcooked? They turn into a gooey, mushy mess. What happens when Noodles & Co (NDLS), which trades at a 78.5 times forward earnings, releases disappointing results? It too turns into a gooey, mushy mess.

Juergen Teller, Courtesy of the artist

Shares of Noodles & Co. have dropped 8% to $42.92 today at 11:47 a.m. Noodles is also dragging down other high-flying restaurant stocks. Potbelly (PBPB), for instance, has fallen 4.4% to $25.78, while Chipotle Mexican Grill (CMG) has declined 1.9% to $529.18 and Starbucks (SBUX) is off 1.5% at $79.92.

Reuters has the details on Noodles & Co’s disappointing results:

On an adjusted basis, Noodles, which serves pasta and noodle dishes for as little as $8, earned 11 cents per share in the third quarter, in line with the average analyst estimate.

Revenue rose 15.4 percent to $88.9 million. Analysts on average were expecting revenue of $91 million in the quarter ended October 1, according to Thomson Reuters I/B/E/S…

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Comparable sales at Noodles’ company-owned restaurants rose 2.4 percent in the third quarter, below the 2.7 percent rise that analysts polled by Consensus Metrix expected.

Wedbush’s Nick Setyan and Colin Radke offer their thoughts:

We are cautious with respect to unit-level margin (currently in-line with growth peers) expansion going forward given low-single digit SSS growth with ~1% annual pricing and AUVs, including tx/store, that are below quick casual peers…We believe NDLS' current premiums on a P/E and EV/EBITDA basis to the restaurant growth group are unwarranted given largely in-line metrics relative to the group.

Even after today’s drop, shares of Noodles are up 138% from their offering price of $18 a share.

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