Wingstop (WING): Special Dividends May Become A Recurring Event - Wedbush
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Wedbush analyst, Nick Setyan, reiterated his Outperform rating on shares of Wingstop (NASDAQ: WING) after checks indicated the analyst's comp estimates may be too low. The analyst believes Q3-to-date SSS growth is tracking at least in line with 4.2% consensus and he is increasing his Q3 domestic franchised comp estimate to 4.5% from 4.0% and company-owned comp estimate to 3.5% from 3.0%. Checks indicate increasing brand awareness continues to be the main driver of SSS increases.
The analyst stated "We view the maturation cycle of new units, mobile/online ordering, increased advertising, new LTO flavors, and increasingly favorable relative pricing as near-term comp drivers. We view a move to national advertising, a potential loyalty rollout, and remodels as additional layers of comp beginning in 2017. We believe the above-mentioned SSS growth drivers are poised to drive upside to current 2H consensus comp estimates. We also view unit growth guidance, recently upped to 130-140 from 125-135, and the associated franchise fees, along with rising royalty rates, as potential contributors to G&A leverage ahead of implied guidance".
Special dividends may become a regular event as well. The analyst went on to say "We believe the recent recapitalization and payment of a special dividend is poised to become a recurring event as the company pays down debt over time. We continue to estimate the next special dividend could be as high as $4.50/share and be paid by the end of 2018."
Checks indicate Q3-to-date SSS growth tracking at least in line with 4.2% consensus. We are increasing our Q3 domestic franchised comp estimate to 4.5% from 4.0% and our company-owned comp estimate to 3.5% from 3.0%. Our checks indicate increasing brand awareness continues to be the main driver of SSS increases.
price target of $36.00 (from $35.00)
Shares of Wingstop closed at $30.36 yesterday.
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