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Can Shake Shack (SHAK) Spring a Surprise in Q2 Earnings?
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Shake Shack Inc. (SHAK - Free Report) is scheduled to report second-quarter 2016 numbers on Aug 10, after market close.
Last quarter, Shake Shack posted a 33.33% positive earnings surprise. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 71.43%.
Let’s see how things are shaping up for this announcement.
Shake Shack’s cult following and successful expansion into various cities around the world has been driving traffic, which in turn is leading to higher comps. Also, menu expansion and innovation coupled with limited time offerings are boosting comps. We expect the trend to continue in the to-be-reported quarter.
Moreover, Shake Shack is poised to cash in on the surging popularity of the U.S. fast-casual market and boost earnings on the back of lucrative store economics, brand strength and a solid balance sheet. Also, increased focus on catering to the needs of highly valued millennial consumers who prefer brand experience and healthy food, should further aid the quarter’s comps.
However, elevated labor and pre-opening costs are adding to the expenses, which might hurt profitability and margins in the second quarter.
Earnings Whispers
Our proven model does not conclusively show that Shake Shack is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Shake Shack has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 13 cents.
Zacks Rank: Shake Shack has a Zacks Rank #3 which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Dave & Buster's Entertainment, Inc. (PLAY - Free Report) has an earnings ESP of +2.27% and a Zacks Rank #1.
Macy's, Inc. (M - Free Report) has an earnings ESP of +31.71% and a Zacks Rank #3.
Carrols Restaurant Group, Inc. (TAST - Free Report) has an earnings ESP of +4.35% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
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Can Shake Shack (SHAK) Spring a Surprise in Q2 Earnings?
Shake Shack Inc. (SHAK - Free Report) is scheduled to report second-quarter 2016 numbers on Aug 10, after market close.
Last quarter, Shake Shack posted a 33.33% positive earnings surprise. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 71.43%.
Let’s see how things are shaping up for this announcement.
SHAKE SHACK INC Price and Consensus
SHAKE SHACK INC Price and Consensus | SHAKE SHACK INC Quote
Factors Likely to Influence this Quarter
Shake Shack’s cult following and successful expansion into various cities around the world has been driving traffic, which in turn is leading to higher comps. Also, menu expansion and innovation coupled with limited time offerings are boosting comps. We expect the trend to continue in the to-be-reported quarter.
Moreover, Shake Shack is poised to cash in on the surging popularity of the U.S. fast-casual market and boost earnings on the back of lucrative store economics, brand strength and a solid balance sheet. Also, increased focus on catering to the needs of highly valued millennial consumers who prefer brand experience and healthy food, should further aid the quarter’s comps.
However, elevated labor and pre-opening costs are adding to the expenses, which might hurt profitability and margins in the second quarter.
Earnings Whispers
Our proven model does not conclusively show that Shake Shack is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Shake Shack has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 13 cents.
Zacks Rank: Shake Shack has a Zacks Rank #3 which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Dave & Buster's Entertainment, Inc. (PLAY - Free Report) has an earnings ESP of +2.27% and a Zacks Rank #1.
Macy's, Inc. (M - Free Report) has an earnings ESP of +31.71% and a Zacks Rank #3.
Carrols Restaurant Group, Inc. (TAST - Free Report) has an earnings ESP of +4.35% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>