Dave & Buster's (PLAY) Stock Rallies On Q3 Earnings Beat

Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) posted mixed third-quarter fiscal 2017 results. The bottom line surpassed the Zacks Consensus Estimate, while the top line lagged the same.

The company’s shares gained nearly 9% in after-hours trading on Dec 5, mirroring investors’ optimism on earnings growth.

Earnings & Revenues

Dave & Buster's earnings of 29 cents per share in the third quarter beat the Zacks Consensus Estimate of 23 cents by 26.1%. Also, the bottom line jumped 16% from the year-ago figure of 25 cents, attributable to higher revenue. The results include the impact of certain non-recurring items.

The company reported revenues of $250 million in the quarter, lower than the Zacks Consensus Estimate of $255.4 million. However, the top line improved 9.3% year over year primarily on consistent unit expansion.

Turning to category sales, Food and Beverage revenues rose 6.3% year over year to $107.7 million in the reported quarter. Also, Amusement and Other revenues increased 11.8% to $142.3million.

Dave & Buster's Entertainment, Inc. Price, Consensus and EPS Surprise

Dave & Buster's Entertainment, Inc. Price, Consensus and EPS Surprise

Dave & Buster's Entertainment, Inc. price-consensus-eps-surprise-chart | Dave & Buster's Entertainment, Inc. Quote

Behind the Headline Numbers

Comps decreased 1.3% year over year in the fiscal third quarter, owing to 0.9% decrease in walk-in sales and 4.8% fall in special events sales. The figure compared unfavorably with 5.9% growth recorded in the prior-year quarter and 1.1% increase in the last quarter.

Earnings before interest, taxes, and amortization (EBITDA) rose 9.8% to $45.6 million. Meanwhile, EBITDA margins remained flat at 18.2% when compared with the year-ago quarter.

Notably, the recent hurricanes had an unfavorable impact on comps growth of50 basis points (bps). It also affected total revenues by $2 million and EBIDTA by $0.7 million.

Fiscal 2017 Outlook

Dave & Buster's expects fiscal 2017 revenues in the range of $1.15 billion to $1.16 billion ($1.16 billion to $1.17 billion previously).

The company now projects comps to be flat to up 0.75% on a comparable 52-week basis compared with the prior expectation of an increase of 1% to 2%.

EBITDA is now anticipated between $268 million and$272 million, down from $270 million to $276 million projected earlier.

In fiscal 2017, the company expects to open 14 new stores, including 10 large and four small.

Fiscal 2018 Outlook

For fiscal 2018, management expects low double-digit growth in revenues and high single-digit to low double-digit growth in EBITDA on a comparable 52-week basis.

A total of 14 to 15 new stores are expected to be launched, reflecting unit growth of 13% to 14%.

New Development

The company plans on a smaller-store format of about 15,000 to 20,000 square feet in order to capitalize on demand in smaller markets. Management expects to open 20 to 40 such stores in the long term, including two that are to be opened in 2018. The company believes that this new format will expand its brand potential and spread its growth runway.

Currently, Dave & Buster's carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

Darden Restaurants, Inc.’s (NYSE:DRI) first-quarter fiscal 2018 adjusted earnings of 99 cents per share outpaced the Zacks Consensus Estimate of 98 cents by more than1%. Further, the bottom line improved 12.5% year over year on higher revenues.

Buffalo Wild Wings, Inc.’s (NASDAQ:BWLD) third-quarter adjusted earnings of $1.36 per share increased 5.4% year over year and surpassed the Zacks Consensus Estimate of 78 cents by 74.4%.

In third-quarter fiscal 2017, DineEquity, Inc. (NYSE:DIN) posted earnings of 91 cents per share that surpassed the Zacks Consensus Estimate of 88 cents by 3.4%. However, earnings declined 37.8% year over year mainly due to lower gross profits.

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