Buffalo Wild Wings gains on drop in wing costs

NEW YORK (AP) -- Shares of Buffalo Wild Wings Inc. rose to a new 52-week high Thursday on expectations that the restaurant chain's profits will get a boost from a recent drop in chicken wing costs and continued sales growth.

THE SPARK: Wedbush analyst Nick Setyan boosted his price target for Buffalo Wild Wings shares by $25 to $120, saying that chicken wing prices have dropped significantly over the past two weeks.

THE BIG PICTURE: Minneapolis-based Buffalo Wild Wings owns, operates and franchises over 800 restaurants in the U.S. and Canada. Sales of its traditional and boneless wings account for about 40 percent of its revenue, with alcohol accounting for another 22 percent, according to Setyan.

THE ANALYSIS: Setyan, who rates the stock at "Outperform," boosted his 2013 earnings prediction by 19 cents to $3.79 per share and 2014 profit prediction by 27 cents to $4.67 per share, pointing to the drop in costs.

Analysts, on average, expect per-share profits of $3.61 and $4.33 for 2013 and 2014, respectively, according to FactSet.

Setyan said that in addition to the drop in wing costs, the company's revenue at stores open at least a year appear to be tracking in line with expectations of an increase in the low single digits. The metric is a key measure of a retailer's health, because it excludes revenue at stores that recently opened or closed.

The analyst added that his increased earnings expectations could prove to be "conservative" if wing costs continue to decline, the company continues to sell a favorable mix of items and if it's able to successfully deal with its pricing issues related to larger wing sizes.

THE SHARES: Up 76 cents to $91.73 in midday trading, after peaking at $92.44 earlier in the day and marking their highest price since March 2012.

Over the past 52 weeks, the company's shares have traded between $68.71 and $92.44.