Grubhub (NYSE: GRUB) stock dips on weak Q3 earnings, Q4 forecast

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Grubhub Inc. (NYSE: GRUB) reported a 96% dip in earnings for the third quarter of 2019 due to higher costs and expenses. The results missed analysts’ expectations. The company guided fourth-quarter revenue below consensus estimates. Following this, the stock plunged by 33% in the premarket session.

Net income plunged by 96% to $1.01 million or $0.01 per share. Adjusted earnings dropped by 40% to $0.27 per share. Revenues jumped by 30% to $322 million.

Grubhub (NYSE: GRUB) Q3 2019 Earnings Review

Looking ahead into the fourth quarter, the company expects revenue in the range of $315 million to $335 million and adjusted EBITDA in the range of $15 million to $25 million. The company will be hurt by lower orders, increased spending, and inclusion of additional free delivery and promotional support for certain enterprise partners.

For the third quarter, active diners increased by 29% year-over-year to 21.2 million. Daily Average Grubs rose by 10% to 457,300 from the previous year’s quarter. Gross Food Sales grew 15% year-over-year to $1.4 billion.

The company had a positive impact on its business and long-term shareholder value driven by its investments in delivery market coverage expansion, increase new diner advertising, and accelerate enterprise brand sales efforts. However, Grubhub faced with an increase in costs associated with the investments.

Read: Kellogg Q3 earnings review

The total market for takeout in the US, including pickup and delivery, is greater than $200 billion annually. In the last decade, the online sales of takeout have exploded due to easy ordering, diversity of choice, and superior control and transparency.

The company believes there is still significant opportunity for long-term top and bottom-line growth in the over $200 billion takeout market, which still largely remains offline. Grubhub is expected to spend more and seek many different strategies over the next 12-18 months to increase the restaurant supply aggressively.

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