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Why GrubHub Inc. Stock Jumped Today

What happened

Shares of GrubHub Inc. (NYSE: GRUB) popped today after the company reported second-quarter earnings after the close Thursday and then announced that it had agreed to buy delivery app Eat24 from Yelp Inc. (NYSE: YELP)

The stock closed up 9.2%, while Yelp shares also surged on the news.

Image source: Getty Images

So what

Though it came on the same day as the quarterly report, it appeared to be the pending addition of Eat24 to GrubHub's industry-leading portfolio of delivery apps -- which include Seamless, MenuPages and AllBites -- that drove the stock higher. GrubHub said it would pay $287.5 million for Eat24, using a combination of cash on hand and debt, and it would enter into a long-term strategic partnership with Yelp. The recommendation engine will integrate online ordering from all of GrubHub's restaurants onto its platform. 

As for its earnings report, the company delivered 32% revenue growth to $158.8 million, while daily average orders were up 16% and active diners increased 25%. That revenue figure topped analysts' consensus expectation of $158.1 million. Adjusted earnings per share increased from $0.23 a year ago to $0.26, meeting estimates. 

Now what

In addition to its deal with Yelp, GrubHub inked a similar partnership with Groupon earlier in the week to bring food delivery to that platform. The  company is continuing its pattern of aggressive expansion through acquisitions: In the last two months alone, it bought delivery apps Foodler and OrderUp. The Eat24 deal gives it 75,000 restaurants under its umbrella,  making the company the dominant third-party delivery service. It currently has 23% of the restaurant delivery market, behind only Domino's Pizza, which has 24%.

Excluding those acquisitions, the company forecast full-year revenue of $642 million to $662 million, which would amount to about 32% growth. With its latest slew of acquisitions to propel it, GrubHub's strong growth should continue. 

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Yelp. The Motley Fool has a disclosure policy.