GrubHub (NYSE: GRUB) stock popped 37.6% in February, according to data provided by S&P Global Market Intelligence. Shares climbed following strong fourth-quarter earnings results and news of a partnership with Yum! Brands (NYSE: YUM) -- the company that owns restaurant chains including Pizza Hut, KFC, and Taco Bell.
Continue Reading Below
GrubHub's December-ended quarter saw revenue climb roughly 49% and adjusted earnings per share (EPS) rise roughly 61% -- impressive results that put a nice cap on a great fiscal year. Gross full-year food sales conducted through the company's platform climbed 20% year over year to reach $3.8 billion, and active diners jumped 77% compared to the prior year to reach 14.5 million.
In addition to impressive quarterly and full-year earnings performance, GrubHub also revealed a promising new partnership with Yum! Brands. The deal will see KFC and Taco Bell use GrubHub as their exclusive online ordering and delivery portal, and GrubHub will help promote Yum!'s restaurants on its platform. Per the deal, Yum! will also buy a $200 million stake in GrubHub.
This news was followed by the announcement of another partnership -- this time a data-sharing agreement with FourSquare. The revealing of the FourSquare deal was once again followed by a double-digit stock pop, and shares continued to climb through the month.
GrubHub is guiding for sales between $910 million and $960 million, representing year-over-year sales growth of roughly 37% at the midpoint. Meanwhile, the midpoint of the company's guidance has net income falling roughly 23%, but that's an unfavorable comparison because the company's fourth-quarter 2017 results benefited from one-time tax benefits.
GrubHub is priced for big growth, trading at roughly 63 times this year's expected earnings, but the company appears to be making some smart moves in order to continue its rapid expansion. The deal with Yum! has the potential to expand overall awareness of GrubHub's platform and be a long-term sales driver, and the company has been building its business through acquisitions and a network of partnerships -- having also signed agreements with Yelp and Facebook. These deals could help reduce competitive threats posed by companies including Amazon and Uber.
10 stocks we like better than Yum! BrandsWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Yum! Brands wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of March 5, 2018
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Facebook. The Motley Fool has the following options: short March 2018 $200 calls on Facebook and long March 2018 $170 puts on Facebook. The Motley Fool recommends Grubhub. The Motley Fool has a disclosure policy.