RCI Hospitality Holdings (NASDAQ: RICK) has received a reaffirmed Buy rating and a $98.00 price target from H.C. Wainwright.
The endorsement comes despite the company reporting a slight decrease in fourth-quarter sales. RCI announced combined club and restaurant sales of $72.1 million, marking a 2.6% drop compared to the same period last year and falling short of the anticipated $73.4 million.
The decline in sales was partially attributed to temporary closures, with 26 days of lost business at five Houston locations due to Hurricane Beryl in July, and a Dallas area club suffering from a fire incident. Despite these setbacks, the firm noted a modest improvement in same-store sales, which only saw a 1.1% decrease from the previous year, better than the 1.5% decline in the third quarter.
The club segment of RCI's business demonstrated resilience, with a 2.2% increase in same-store sales over the year. However, the restaurant segment experienced a 16.2% drop in same-store sales for the second consecutive quarter.
In response, RCI has taken steps to reposition this part of its operations, including the sale of an underperforming location in San Antonio, Texas. This strategic move is expected to contribute positively to first-quarter sales in fiscal 2025.
RCI also reported significant share repurchase activity, spending $7.8 million in the fourth quarter and completing $20.6 million for the fiscal year 2024. This action reduced the number of outstanding shares by 442,639, which is viewed as a sign of management's confidence in the company's value. The analyst anticipates continued repurchase activity if the stock remains undervalued.
Looking ahead, with six new properties slated to open, RCI is poised for potential revenue growth in fiscal 2025. The firm's analyst maintains a positive outlook, sustaining a Buy rating with a $98 price target for RCI Hospitality Holdings.
In other recent news, RCI Hospitality Holdings reported improved operational results for Q3 2024, with nightclub sales totaling $75.5 million. The company also announced the opening of new locations, including a Rick's Cabaret and Steakhouse in Central City, Colorado, and Bombshells locations in Denver and Texas, which are expected to contribute to incremental revenue. H.C. Wainwright maintained a Buy rating on RCI Hospitality, highlighting the company's strategic focus and potential for significant revenue growth in 2025.
RCI Hospitality also announced new employment agreements with key executive officers, including an increased annual salary for Travis Reese. In a sign of financial confidence, the company increased its quarterly dividend by 16.7% to $0.07 per share and boosted its share repurchase program by $25 million.
InvestingPro Insights
To complement the analysis of RCI Hospitality Holdings' recent performance and outlook, InvestingPro data offers additional insights into the company's financial health and market position. Despite the recent sales challenges, RCI boasts impressive gross profit margins of 84.65% for the last twelve months as of Q3 2024, highlighting the company's efficiency in managing costs. This aligns with one of the InvestingPro Tips, which notes RCI's "impressive gross profit margins."
The company's commitment to shareholder value is evident not only in its share repurchase program but also in its dividend policy. InvestingPro data reveals that RCI has raised its dividend for 5 consecutive years and has maintained dividend payments for 9 consecutive years. This consistent dividend growth, with a 16.67% increase in the last twelve months, underscores management's confidence in the company's long-term financial stability.
While the current P/E ratio stands at 78.15, the adjusted P/E ratio for the last twelve months is a more modest 17.62, suggesting that the stock may not be as overvalued as the unadjusted ratio implies. This could support the analyst's bullish stance and the $98 price target, especially considering that InvestingPro's fair value estimate for RCI is $51.42, indicating potential upside from the current price.
Investors seeking a more comprehensive analysis can access additional InvestingPro Tips, with 7 more tips available on the platform to further inform investment decisions regarding RCI Hospitality Holdings.
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