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Buffalo Wild Wings (NASDAQ:BWLD) is scheduled to report their fourth quarter 2008 results after the market closes on Wednesday, February 11. Based on our analysis, we at eChristianInvesting.com are expecting BWLD to report disappointing results that fail to meet Wall Street's expectations.

Analyst Expectations

We are forecasting revenues of $115.7 million and EPS of $.36. This would represent a 27% growth in revenues from last year's $91.4 million in the same period. The current analyst consensus calls for revenues of $117.4 million and $.39 EPS. We expect fourth quarter top-line growth to remain strong as store traffic didn't appear to decline significantly during the quarter.

However, chicken wing prices continued to climb and could depress profit margins. In this economic environment we don't expect BWLD to be able to increase prices. Therefore, if chicken wing prices remain high, we would expect to see downward risks to earnings estimates as profitability is hit. On the last earnings call, CEO Sally Smith stated that the company expected revenue to grow 25% in 2009. While this may have been a conservative estimate at the time, we believe current economic conditions warrant even greater conservatism. We would not be surprised for management to revise expectations downward for 2009 growth based on the current environment of declining consumer spending. While we don't expect BWLD to remain immune to the economic headwinds, we are still very favorable on the concept. We would expect BWLD to be one of the early movers in an economic recovery that could begin as early as the second half of 2009.

Share Performance

Buffalo Wild Wing's shares are down 12% since the beginning of the year. In 2008, the stock was one of the stars of the market – gaining 10% while the Dow Jones index dropped 34%.

Valuation

Shares are now trading at 14x consensus 2009 EPS estimates. This is only slightly above their peer group. However, their superior growth should command a premium valuation. We expect that once investors gain more comfort with 2009 performance that this stock could see a strong rally.

Recommendation: Buy with a $25 price target.

Disclosure: no positions

Source: Buffalo Wild Wings - Earnings Expected to Disappoint, But Rally Ahead