Latest news with #FirstWatchRestaurantGroup
Yahoo
09-05-2025
- Business
- Yahoo
FWRG Q1 Earnings Call: Margin Pressures Offset Traffic Improvements and Expansion
Breakfast restaurant chain First Watch Restaurant Group (NASDAQ:FWRG) met Wall Street's revenue expectations in Q1 CY2025, with sales up 16.4% year on year to $282.2 million. Its non-GAAP profit of $0.01 per share was $0.03 below analysts' consensus estimates. Is now the time to buy FWRG? Find out in our full research report (it's free). Revenue: $282.2 million vs analyst estimates of $283.5 million (16.4% year-on-year growth, in line) Adjusted EPS: $0.01 vs analyst estimates of $0.03 ($0.03 miss) Adjusted EBITDA: $22.75 million vs analyst estimates of $25.81 million (8.1% margin, 11.9% miss) EBITDA guidance for the full year is $116.5 million at the midpoint, below analyst estimates of $125.2 million Operating Margin: 0.4%, down from 5.1% in the same quarter last year Free Cash Flow was -$16.42 million compared to -$3.6 million in the same quarter last year Locations: 584 at quarter end, up from 531 in the same quarter last year Same-Store Sales were flat year on year, in line with the same quarter last year Market Capitalization: $975.3 million First Watch's first quarter results reflected a mix of steady top-line growth and mounting cost pressures. Management attributed revenue gains to positive traffic trends in key periods, continued expansion into new markets with 13 restaurant openings, and targeted marketing campaigns that improved customer engagement. CEO Chris Tomasso cited sequential improvements in restaurant traffic, particularly in March and April, as well as operational investments that drove further efficiency and lower employee turnover. Looking ahead, management signaled that persistent inflation in core food commodities and higher labor and benefit costs will weigh on margins throughout the year. CFO Mel Hope flagged that four of the company's top five commodities are experiencing high inflation, and that new tariffs and selective customer-facing initiatives are expected to continue pressuring profitability. Despite these headwinds, Tomasso emphasized the company's confidence in its unit growth strategy and its ongoing marketing efforts to support traffic, while acknowledging that margin recovery will depend on relief from commodity costs and careful cost management. Management's remarks outlined several operational and market factors that shaped the quarter's results, highlighting the interplay between growth initiatives and profit headwinds. Traffic Trend Recovery: Sequential improvements in restaurant traffic, with April achieving the best monthly result in over two years, supported optimism for sustained traffic growth in upcoming quarters. Marketing and Customer Engagement: Enhanced digital and targeted marketing campaigns, initiated in March, led to stronger brand awareness and customer frequency, particularly in select geographies. These efforts are expected to scale further in 2025. Third-Party Delivery Optimization: Strategic changes with delivery partners resulted in a reversal of negative traffic trends in that channel, though at lower per-order margins. Commodity and Labor Cost Pressures: Higher costs in eggs, bacon, coffee, and avocados, as well as increased health benefits and labor, drove margin compression. Management cited these as largely transitory but significant in the current environment. Expansion into New Markets: Openings in new states, such as Massachusetts and Idaho, demonstrated the brand's geographic portability and provided evidence for management's long-term growth target of over 2,200 U.S. locations. Management's outlook for the remainder of 2025 focuses on driving top-line growth through new restaurant openings and marketing, while navigating cost inflation and macro uncertainty. Inflation and Tariff Impact: Ongoing high-single-digit inflation in key commodities and new tariffs are expected to pressure margins, with peak cost impact anticipated in the second quarter before some relief later in the year. Growth Through New Units: Continued double-digit percentage growth in restaurant openings, especially in untapped markets, is viewed as the primary engine for revenue expansion. Customer-Facing Initiatives: Programs like 'surprise and delight' and increased portion sizes are intended to build loyalty and frequency, but may continue to affect short-term profitability if not carefully managed. Andrew Charles (TD Cowen): Asked about the sustainability of positive traffic trends and the trade-offs between driving traffic at lower margins; management expressed confidence in the approach, citing encouraging recent results. Jim Salera (Stephens Inc.): Inquired about learnings from increased media spend and engagement; leadership noted early positive impacts and ongoing adjustments to optimize effectiveness across markets. Sara Senatore (BofA): Sought clarity on planned restaurant closures and the margin impact of customer loyalty programs; management described closures as routine and emphasized the long-term value of loyalty investments despite near-term cost pressures. Brian Mullan (Piper Sandler): Asked for updates on menu innovation and beverage expansion; management confirmed continued testing of new beverage options to drive incremental sales. Gregory Francfort (Guggenheim Securities): Queried long-term margin targets and third-party delivery dynamics; management reiterated a restaurant-level margin target of 18-20% and discussed partnership benefits in off-premise channels. In the coming quarters, the StockStory team will track (1) whether traffic trends remain positive in both dine-in and delivery channels, (2) if commodity and labor cost inflation begin to ease as anticipated in the second half of the year, and (3) the success of new market entries and continued restaurant expansion. The effectiveness of marketing initiatives in driving repeat visits and the impact of loyalty programs on customer retention will also be important indicators of progress. First Watch currently trades at a forward P/E ratio of 40.8×. At this valuation, is it a buy or sell post earnings? The answer lies in our free research report. Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years. Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
08-05-2025
- Business
- Yahoo
First Watch Restaurant Group, Inc. (FWRG): Among Stocks with Insanely High PE Ratios Insiders Are Selling
We recently published a list of . In this article, we are going to take a look at where First Watch Restaurant Group, Inc. (NASDAQ:FWRG) stands against other stocks with insanely high PE ratios insiders are selling. The U.S. stock market has turned into a theater of extremes right now. Growth stocks are seeing an abnormal price hike, but in some cases, it is almost proportionately met with the insiders cashing out. The flood of insider sales in companies trading at unbelievable price-to-earnings (PE) ratios has become the prime example of what would happen when euphoria crashes with caution. But why are corporate executives – the insiders who know the company best- selling shares when investors are piling in on them? Let's connect the dots. READ ALSO: Growth stocks continue to be at the center of attraction in 2025. They have been outperforming their value counterpart over the past decade, fueled by declining interest rates and increasing bets on innovation. Even when the Fed hiked the rates in 2023, growth stocks strived under pressure, with some sectors continuing to command premium valuations. Many of these companies are now trading at PE ratios that even optimistic analysts could not justify. For that reason, insiders are selling, and they are doing it aggressively. Retail investors chase fast-paced moments while corporate executives and major stakeholders pull their investments from the company. Data from the SEC's Form 4 filings reveal that insider sales for high-PE firms have increased recently, reflecting a widening gap between Wall Street's optimism and Main Street's reality. It is yet to be decided whether these sales are a vote of no confidence in the insanely high valuations or simply prudent profit-taking. To answer this, we need to look at the broader economic environment. Recently, President Trump proposed a $163 billion budget cut, which involves slashing domestic programs while concentrating on defense and border security. The reduced funding for housing, education, and healthcare could hurt consumer spending, and hence, the cut has introduced fresh uncertainty into a market where investors are already scrambling due to interest rate and tariff rate uncertainties. On the other hand, the Treasury bond market is also flashing warning signs. According to a report by Reuters, two-year yields have declined to 3.57%, nearly a full percentage point below the Fed's benchmark rate. Treasury Secretary Scott Bessent calls the gap a clear signal for rate cuts. When we look back at history, we will see that these dislocations usually preceded economic slowdowns, and in such an environment, the high PE stocks that could not meet the inflated expectations with their earnings will fall. That said, high PE ratios are not always bad. They often reflect the market's confidence in the company's future growth. But when insiders start to dump the stocks amid geopolitical disturbances and rate cut debates, we cannot help but wonder whether this is calm before a storm. And it is here we must exercise caution. From our picks, you could see a red flag or a buying opportunity. However, one thing is clear. In today's market, ignoring the warning signs could be the riskiest move. We have followed a few criteria when putting together our list of 10 stocks with unbelievably high PE ratios, being sold by insiders. All the stocks in the list have a PE ratio of 35 or more, which defines the term insanely-high for our article. We have further reduced the number of stocks to 10 by considering only those with an insider selling of 5% change or more in the last 6 months. This is to ensure that the potential investors are aware of the change in institutional mindset for stocks with an upward-trending PE ratio. Based on this insider selling, our picks have been ranked from 10 to 1. All the data in the article was taken from financial databases and analyst reports, with all information updated as of May 05, 2025. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (). A busy restaurant kitchen with a chef carefully plating a meal. Headquartered in Florida, First Watch Restaurant Group, Inc. (NASDAQ:FWRG) is a daytime dining chain that offers breakfast, brunch, and lunch across the U.S. Competing with tough players like Denny's, the company gains a competitive advantage through fresh, made-to-order menu offerings and a no-franchise model for quality control. First Watch Restaurant Group, Inc. (NASDAQ:FWRG)'s primary target is suburban markets with significant foot traffic and many families. Labor availability, food cost inflation, and consumer preferences towards casual dining influence the company's performance. It is among the stocks insiders are selling. First Watch Restaurant Group, Inc. (NASDAQ:FWRG) has recently announced its Q1 2025 results, which reported a 16.51% year-over-year growth. It also established 13 new system-wide restaurants across 10 states. On the other hand, the net income during the period has decreased to -$0.8 million from $7.2 million in the same period the previous year, owing to a significant decline in both income from operations margin and restaurant-level operating profit margin, and high food and labor costs. The new Adjusted EBITDA guidance range has declined from $124.0 million to $130.0 million in 2024 to $114.0 million to $119.0 million in 2025, indicating company growth complications. Investor expectations for First Watch Restaurant Group, Inc. (NASDAQ:FWRG) seem to stand above average, as represented by the notable P/E ratio of 61.36. However, with a dramatic 52.97% rise in insider selling, it may be possible that the confidence from within the company's leadership is fading. Overall, FWRG ranks 2nd on our list of stocks with insanely high PE ratios insiders are selling. While we acknowledge the potential of FWRG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than FWRG but that trades at less than 5 times its earnings, check out our report about this . READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey.
Yahoo
06-05-2025
- Business
- Yahoo
First Watch's (NASDAQ:FWRG) Q1 Earnings Results: Revenue In Line With Expectations But Stock Drops
Breakfast restaurant chain First Watch Restaurant Group (NASDAQ:FWRG) met Wall Street's revenue expectations in Q1 CY2025, with sales up 16.4% year on year to $282.2 million. Its GAAP loss of $0.01 per share was significantly below analysts' consensus estimates. Is now the time to buy First Watch? Find out in our full research report. First Watch (FWRG) Q1 CY2025 Highlights: Revenue: $282.2 million vs analyst estimates of $283.5 million (16.4% year-on-year growth, in line) EPS (GAAP): -$0.01 vs analyst estimates of $0.03 (significant miss) Adjusted EBITDA: $22.75 million vs analyst estimates of $25.81 million (8.1% margin, 11.9% miss) EBITDA guidance for the full year is $116.5 million at the midpoint, below analyst estimates of $125 million Operating Margin: 0.4%, down from 5.1% in the same quarter last year Locations: 584 at quarter end, up from 531 in the same quarter last year Same-Store Sales were flat year on year, in line with the same quarter last year Market Capitalization: $1.13 billion "First quarter same restaurant traffic results are encouraging and continued the trends we experienced exiting 2024, demonstrating both the strength and the resilience of the First Watch brand,' said Chris Tomasso, CEO and President of First Watch. Company Overview Based on a nautical reference to the first work shift aboard a ship, First Watch (NASDAQ:FWRG) is a chain of breakfast and brunch restaurants whose menu is heavily-focused on eggs and griddle items such as pancakes. Sales Growth Examining a company's long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. With $1.06 billion in revenue over the past 12 months, First Watch is a mid-sized restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the bright side, it can still flex high growth rates because it's working from a smaller revenue base. As you can see below, First Watch grew its sales at an exceptional 19.2% compounded annual growth rate over the last five years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new restaurants and increased sales at existing, established dining locations. First Watch Quarterly Revenue This quarter, First Watch's year-on-year revenue growth was 16.4%, and its $282.2 million of revenue was in line with Wall Street's estimates. Looking ahead, sell-side analysts expect revenue to grow 20% over the next 12 months, similar to its five-year rate. This projection is admirable and suggests the market is baking in success for its menu offerings.
Yahoo
15-04-2025
- Business
- Yahoo
Why First Watch Restaurant Group (FWRG) Is Among the Top Restaurant Stocks to Buy Under $20
We recently published a list of . In this article, we are going to take a look at where First Watch Restaurant Group, Inc. (NASDAQ:FWRG) stands against other top restaurant stocks to buy under $20. Restaurant stocks are showing volatility amid Trump's tariff impositions across various sectors. On April 7, CNBC reported that while US stocks are tumbling due to the effects of high tariffs on the import of goods from key trading partners, analysts do not anticipate the tariffs to hit most restaurant stocks directly. However, inflation is expected to follow behind, fueled by expert and investor fear of an impending recession. This may put pressure on the spending capacity of consumers, resulting in an economic downturn. CNBC reported that UBS analyst Dennis Geiger said the following in a note to clients: 'We view the direct cost impact of tariffs on restaurants as manageable, with a focus on select commodity costs, but see the bigger risk as incremental pressure on consumer spending and industry demand.' CNBC also reported that investor concerns affected restaurant stocks across all sectors. Fast food restaurant chains have historically shown the most resilience during recessions, as consumers looking for cheap dining options typically level down from fast-casual or full-service diners and eateries to fast food options. However, the drop in consumer spending witnessed last year saw fast food restaurants hit hard, as low-income consumers cut their spending to this sector, visiting them less frequently. High-income consumers, on the other hand, continued with their usual dining habits, creating a gap that negatively affected fast food companies. Quick-service restaurants thus underwent same-store sales declines. On March 8, Mario Carbone, Major Food Group chef and co-founder, appeared on CNBC's 'Power Lunch' to discuss the effects of Trump's tariffs on the food industry and how high-end consumers are behaving in the sector. Talking about New York, he said that the numbers are booming, going above their pre-Covid benchmarks. New York is thus telling us that everything is good, and there is no fear right now in dining in the luxury sector. Stats are up, and restaurants are packed, with consumer energy through the roof. As of right now, there are no signs of slowing at all if one evaluates the spending and trends in restaurant reports. However, Carbone said that inflation hits the food and restaurant industry just like everyone else. The luxury food sector is responsible to the customer for bringing in the best ingredients for every meal, which is why it has no choice but to pass the effects on to the consumer in case such trends materialize. We sifted through stock screeners, financial media reports, and ETFs to compile a list of 20 restaurant stocks under $20 as of April 13, 2025, and chose the top 10 most popular among hedge funds as of Q4 2024. The list is ordered in ascending order of hedge fund sentiment. We sourced the hedge fund sentiment data from Insider Monkey's database. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (). A busy restaurant kitchen with a chef carefully plating a meal. Share Price: $17.54 Number of Hedge Fund Holders: 15 First Watch Restaurant Group, Inc. (NASDAQ:FWRG) owns and operates restaurants on a daytime dining concept, providing made-to-order breakfast, lunch, and brunch with cocktails and alcohol. It operates around 572 restaurants, of which 489 are owned by the company, and 83 are franchise-owned. On April 1, TD Cowen analyst Andrew Charles upgraded the rating on First Watch Restaurant Group, Inc. (NASDAQ:FWRG) to a Buy, setting a price target of $22.00. The analyst told investors he anticipates 2025 to be a year of improved same-store sales, supported by effective and enhanced marketing strategies and increased marketing expenditure. According to the analyst, the company's marketing spending as a percentage of revenue is significantly low compared to industry standards, which represents the potential for growth. He also opined that First Watch Restaurant Group, Inc. (NASDAQ:FWRG) is recovering from the sales challenges it came across in 2024, as positive trends are emerging in key markets such as Florida and improvements are materializing in third-party delivery traffic. The analyst also highlighted the potential upside in adjusted EBITDA estimates, especially with the fall in egg prices, which could help relieve commodity inflation pressures. In addition, the opportunity for administrative and general leverage implies a significant advantage. The analyst estimated that these trends put First Watch Restaurant Group, Inc. (NASDAQ:FWRG) in a beneficial position for improved financial performance in the coming years. Overall, FWRG ranks 9th on our list of the top restaurant stocks to buy under $20. While we acknowledge the potential for FWRG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than FWRG but trades at less than 5 times its earnings, check out our report about this cheapest AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey. Sign in to access your portfolio
Yahoo
01-04-2025
- Business
- Yahoo
First Watch Restaurant Group (NASDAQ:FWRG) Is Experiencing Growth In Returns On Capital
What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at First Watch Restaurant Group (NASDAQ:FWRG) so let's look a bit deeper. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on First Watch Restaurant Group is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.032 = US$44m ÷ (US$1.5b - US$138m) (Based on the trailing twelve months to December 2024). Therefore, First Watch Restaurant Group has an ROCE of 3.2%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 9.8%. Check out our latest analysis for First Watch Restaurant Group Above you can see how the current ROCE for First Watch Restaurant Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering First Watch Restaurant Group for free. The fact that First Watch Restaurant Group is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 3.2% on its capital. Not only that, but the company is utilizing 51% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger. Overall, First Watch Restaurant Group gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Since the stock has returned a solid 24% to shareholders over the last three years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if First Watch Restaurant Group can keep these trends up, it could have a bright future ahead. One more thing to note, we've identified 2 warning signs with First Watch Restaurant Group and understanding these should be part of your investment process. While First Watch Restaurant Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
