• Earnings

Grubhub earnings beat expectations, stock still plummets

Online food ordering and delivery company Grubhub [GRUB], which boasts over 85,000 restaurant partners in more than 1,600 US cities and London, has released its earnings results for the third quarter. 

The Chicago-based company’s third quarter earnings report recorded revenues of $247.2m, a 52% year-over-year increase from last year’s $163m, and a net income of $22.7m. 

Matt Maloney, Grubhub’s founder and CEO, said this quarter’s growth is mainly due to the large addition of new diners.   

“Better restaurant selection, a more intelligent diner platform and more strategic marketing continue to bring more high quality diners to Grubhub,” he said. 

Grubhub’s recorded revenues beat analysts estimates of $239m and its adjusted earnings of $0.45 cents per share, also beat consensus estimates that had suggested the company would post earnings of $0.41 per share.

But despite beating estimates, its stock price plunged by over 10% in early trading on Thursday, with even a positive report not enough to buoy the stock amidst the ongoing market turmoil.


Beating estimates

Grubhub priced its April 2014 IPO of 7.4m shares at $26 per share, raising nearly $200m in the process. The stock hit all-time highs in mid-September, at $146.11, but has floundered since then (along with many other tech stocks).

After this week’s performance, analysts seem to be content with a neutral forecast.

From a September high of $146.11 it has now slipped below the $100 mark. In the previous four quarters, Grubhub beat earnings estimates each time by an average of 25.6%.

In Q2, its revenue of $239.7m beat the Zacks Consensus Estimate of $233m, which was a year-on-year increase of 51%. 


Rebound potential?

The recent tech sell-off is one reason to keep an eye out for Grubhub’s stock with a potential rebound in play.

In general, the company has benefitted from its growing user base and improving delivery business. On 17 October, Grubhub announced a further expansion of its delivery capabilities, opening its services to customers across 19 new states in America – the addition of these states to the 17 announced in July, brought the number of new markets now serviced by Grubhub to over 100 in 2018.

Acquisitions have also played a part; the company bought Yelp Eat24, OrderUp, Tapingo and Foodler, meaning that the company counts among its diners 15.6m active Grubhub users, as of June. A 70% increase year-on-year from Q2. 

Grubhub is also in partnership with Yelp, making it the primary online ordering partner for the site’s restaurants. It’s the sole partner of KFC and Taco Bell in the US. 

Investors will be now looking to see Grubhub deliver on its promise to broaden delivery coverage areas and increase marketing spend. And yet the company’s expansion of its service into 70 countries may effect profits as expenses increase in the short-to-medium term. 


What’s next?

As the market leader in the US, with 50% of the market share, the future looks rosy for Grubhub. Expected to grow at a near 10% per annum rate through to 2022, the main caveat to future expansion is the inroads competitor Uber Eats is making in multiple markets. As recently as April in the US, Grubhub had 60% market share; Uber Eats has since gone from 10% to 20%. 

Along with the company’s future expansion plans, the US online food delivery market is estimated to grow from $17bn this year to more than $24bn in 2023, according to Statista.
Grubhub’s earnings release for the fourth quarter is expected February 2019.

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