On Friday, Benchmark adjusted its stock price target for First Watch (NASDAQ: FWRG), increasing it to $24 from the previous $23, while maintaining a Buy rating on the stock. The adjustment followed the restaurant chain's third-quarter earnings report, which revealed a slight miss in revenue expectations but an outperformance in adjusted EBITDA.
First Watch reported third-quarter 2024 revenues that fell marginally short of consensus estimates, with same-store sales (SSS) declining by 1.9%, just 0.1 percentage points below the anticipated figure. The company's restaurant-level margin came to 18.9%, which was 0.4 percentage points lower than consensus, attributed to other restaurant expenses exceeding expectations by the same margin.
Adjusted earnings per share (EPS) stood at $0.03, which was a cent lower than the consensus, while adjusted EBITDA reached $25.6 million, surpassing the expected $23.9 million.
The brand experienced an improvement in SSS trends throughout the third quarter, with a notable positive shift in dine-in traffic during September, a trend that has persisted into the fourth quarter to date. First Watch's successful deployment of personalized targeted marketing campaigns, leveraging its substantial customer database for the first time, contributed to the positive results seen in September and the current quarter.
Benchmark's analyst highlighted the brand's continued growth and scale advantages as the rationale behind the increased price target. The report reflected optimism about First Watch's strategic marketing initiatives and its ability to attract diners, which appears to be translating into financial performance.
Despite the minor setbacks in revenue and margins, the company's overall financial health, as evidenced by the robust adjusted EBITDA figures, supported the analyst's positive outlook.
In other recent news, First Watch Restaurant Group (LON:RTN) has announced significant developments. The financial services firm, Stephens, initiated coverage on First Watch, assigning an Overweight rating and setting a price target of $20.
The firm's analysis suggests potential for growth, forecasting annual revenue growth in the low double-digits percentage driven by over 10% growth in new units and low single-digit percentage growth in same-store sales.
In addition, First Watch recently appointed Rob Conti as its new Chief Information Officer, indicating a strategic move to align technology initiatives with the company's growth objectives. This follows the company's second-quarter financial results for 2024, which reported a 37% increase in adjusted EBITDA and a 19.5% rise in total revenues, despite a slight decline in same restaurant sales.
The company also opened seven new locations and acquired a franchisee in the Raleigh-Durham market. However, First Watch projects a challenging second half of the year with anticipated declines in same restaurant traffic and flat to negative same restaurant sales growth.
Nevertheless, the company maintains its total revenue growth guidance of 17% to 19% and plans to open several new restaurants in 2024. These are the recent developments in the company's operations.
InvestingPro Insights
First Watch Restaurant Group (NASDAQ: FWRG) has shown impressive financial performance, aligning with Benchmark's optimistic outlook. According to InvestingPro data, the company's revenue growth stands at 19.77% for the last twelve months as of Q3 2024, with a quarterly revenue growth of 14.78% in Q3 2024. This robust growth trajectory supports the analyst's positive view on the company's expansion and scale advantages.
InvestingPro Tips highlight that First Watch has been profitable over the last twelve months, with analysts predicting continued profitability this year. This aligns with the company's strong adjusted EBITDA performance mentioned in the article. However, investors should note that the stock is trading at a high earnings multiple, with a P/E ratio of 55.05, which may indicate high growth expectations.
The company's recent stock performance has been particularly strong, with InvestingPro data showing a significant 54.99% return over the last month and a 24.81% return over the last three months. This surge in stock price correlates with the improved same-store sales trends and successful marketing initiatives mentioned in the article.
For readers interested in a more comprehensive analysis, InvestingPro offers 12 additional tips for First Watch Restaurant Group, providing a deeper understanding of the company's financial health and market position.
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