Wingstop (NASDAQ:WING) Delivers Impressive Q1

Fast-food chain Wingstop (NASDAQ:WING) reported results ahead of analysts' expectations in Q1 CY2024, with revenue up 34.1% year on year to $145.8 million. It made a non-GAAP profit of $0.98 per share, improving from its profit of $0.59 per share in the same quarter last year.

Is now the time to buy Wingstop? Find out by accessing our full research report, it's free.

"Our fiscal first quarter 2024 showcased the momentum behind the Wingstop brand and the continued strength of our strategies, delivering 21.6% domestic same-store sales growth driven almost entirely by transaction growth," said Michael Skipworth, President & Chief Executive Officer.

The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ:WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.

Modern Fast Food

Modern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.

Sales Growth

Wingstop is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.

As you can see below, the company's annualized revenue growth rate of 24.9% over the last five years was incredible as it added more dining locations and increased sales at existing, established restaurants.

This quarter, Wingstop reported wonderful year-on-year revenue growth of 34.1%, and its $145.8 million in revenue exceeded Wall Street's estimates by 7.2%. Looking ahead, Wall Street expects sales to grow 17.2% over the next 12 months, a deceleration from this quarter.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefitting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.

Same-Store Sales

Wingstop's demand has been spectacular for a restaurant business over the last eight quarters. On average, the company has grown its same-store sales by an impressive 13.4% year on year. This performance gives it the confidence to rapidly open new restaurants. When a company has strong demand, more locations should help it reach more customers seeking its meals and boost revenue growth.

In the latest quarter, Wingstop's same-store sales rose 21.6% year on year. This growth was in line with the 20.1% year-on-year increase it posted 12 months ago.

Key Takeaways from Wingstop's Q1 Results

We were impressed by how significantly Wingstop blew past analysts' revenue, gross margin, EBITDA, and EPS expectations this quarter. These beats were driven by its same-store sales growth of 21.6%, which crushed Wall Street's forecast of 12.7%. Management noted most of its growth came from increased transactions, not price, which is very encouraging. The company also opened more restaurants than expected in the quarter, a tailwind for its revenue growth.

Looking ahead, Wingstop's low double-digit same-store sales growth guidance for the full year also exceeded estimates, and it declared a dividend of $0.22 per share, payable on June 7, 2024 to stockholders of record as of May 17, 2024. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The stock is up 2.2% after reporting and currently trades at $393.21 per share.

Wingstop may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.