We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The restaurant industry is in shambles for quite some time now with the current Zacks Industry Rank in the bottom 34%. Soft comps and increasing labor costs and still-tepid consumer spending have been weighing on the sector.
As a result, the industry has been displaying sluggish trends after prolonged strength. As per restaurant.org, Restaurant Performance Index (RPI) dropped below 100 in August, marking the first below-100 reading in eight months. Notably, a figure below 100 indicates ‘a contraction for key industry indicators’.
This makes it more important to look at how restaurant stocks are performing this earnings reporting cycle and find out if it can write the turnaround story for the sector.
The fast food behemoth McDonald's Corp. (MCD - Free Report) beat on both lines. Earnings per share of $1.62 surpassed the Zacks Consensus Estimate of $1.48 and improved 15.7% from the year-ago quarter. Revenues of $6.42 billion beat the Zacks Consensus Estimate of $6.29 billion but were down 3%. Global comps grew 3.5%, backed by positive comps across all segments.
Another key player of the industry, Yum Brands Inc. (YUM - Free Report) , reported third-quarter 2016 earnings of $1.09 per share, in line with the Zacks Consensus Estimate. Earnings were up 9% year over year. Total revenue of $3.32 billion declined 3.2% year over year and missed the Zacks Consensus Estimate of $3.51 billion by 5.5%.
Domino's Pizza Inc.’s (DPZ - Free Report) third-quarter 2016 earnings and revenues surpassed expectations. Adjusted earnings of $0.96 per share beat the Zacks Consensus Estimate of $0.90 and climbed 43.3% year over year. Revenues increased 16.9% year over year to $567 million and came ahead of the Zacks Consensus Estimate of $543 million.
Dunkin' Brands Group Inc. reported mixed third-quarter 2016 results, wherein the bottom line outpaced the Zacks Consensus Estimate while the top line lagged the same.
We are just in the middle of the restaurant earnings reporting cycle, which looks moderate as of now. Investors must be interested in knowing how the sector might be performing throughout the cycle, so that they can take investment decisions on it.
As we have a pure-play ETF on the restaurant industry, namely Restaurant ETF (BITE - Free Report) , the investing task becomes easier. Investors expecting the sector to turn around but still confused about which stock to pick (even from the pack of the top-rated ones), can easily play BITE (see all consumer discretionary ETFs here).
Papa John's International Inc. (PZZA - Free Report) has a Zacks Rank #2 (Buy) and an Earnings ESP of 0.00%, making an earnings beat unlikely. However, the stock has a favorable Growth Style Score of A, though it fails on the Value score and Momentum score of D. The company is expected to report on November 1, 2016. PZZA is the top holding of BITE with 3.09% weight.
Wingstop Inc. (WING - Free Report) has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of 0.00%, again making surprise prediction difficult. WING, which is also expected to report on November 1, takes the second spot in BITE with 2.78% weight.
Jack in the Box Inc. (JACK - Free Report) has a Zacks Rank #2 and an Earnings ESP of 0.00%. The company is likely to report on November 15. JACK gets 2.75% of the fund.
El Pollo Loco Holdings Inc. (LOCO - Free Report) has a Zacks Rank #2 and an Earnings ESP of 0.00%, again putting the odds of earnings beat in jeopardy. LOCO, which is also expected to report on November 3, takes the second spot in BITE with 2.71% weight.
Bottom Line
Overall, the situation is still subdued. Only a pickup in economic growth and further improvement consumer sentiments can offer sustained relief to the sector. The fund gained about 0.4% in the last one month (as of October 24, 2016) (read: Retail Sales Recover in September: ETF & Stock Winners).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
How Does Q3 Earnings Taste to Restaurant ETF?
The restaurant industry is in shambles for quite some time now with the current Zacks Industry Rank in the bottom 34%. Soft comps and increasing labor costs and still-tepid consumer spending have been weighing on the sector.
As a result, the industry has been displaying sluggish trends after prolonged strength. As per restaurant.org, Restaurant Performance Index (RPI) dropped below 100 in August, marking the first below-100 reading in eight months. Notably, a figure below 100 indicates ‘a contraction for key industry indicators’.
This makes it more important to look at how restaurant stocks are performing this earnings reporting cycle and find out if it can write the turnaround story for the sector.
The fast food behemoth McDonald's Corp. (MCD - Free Report) beat on both lines. Earnings per share of $1.62 surpassed the Zacks Consensus Estimate of $1.48 and improved 15.7% from the year-ago quarter. Revenues of $6.42 billion beat the Zacks Consensus Estimate of $6.29 billion but were down 3%. Global comps grew 3.5%, backed by positive comps across all segments.
Another key player of the industry, Yum Brands Inc. (YUM - Free Report) , reported third-quarter 2016 earnings of $1.09 per share, in line with the Zacks Consensus Estimate. Earnings were up 9% year over year. Total revenue of $3.32 billion declined 3.2% year over year and missed the Zacks Consensus Estimate of $3.51 billion by 5.5%.
Domino's Pizza Inc.’s (DPZ - Free Report) third-quarter 2016 earnings and revenues surpassed expectations. Adjusted earnings of $0.96 per share beat the Zacks Consensus Estimate of $0.90 and climbed 43.3% year over year. Revenues increased 16.9% year over year to $567 million and came ahead of the Zacks Consensus Estimate of $543 million.
Dunkin' Brands Group Inc. reported mixed third-quarter 2016 results, wherein the bottom line outpaced the Zacks Consensus Estimate while the top line lagged the same.
We are just in the middle of the restaurant earnings reporting cycle, which looks moderate as of now. Investors must be interested in knowing how the sector might be performing throughout the cycle, so that they can take investment decisions on it.
As we have a pure-play ETF on the restaurant industry, namely Restaurant ETF (BITE - Free Report) , the investing task becomes easier. Investors expecting the sector to turn around but still confused about which stock to pick (even from the pack of the top-rated ones), can easily play BITE (see all consumer discretionary ETFs here).
For them, we have highlighted our earnings prediction of some of the holdings of BITE (read: New Restaurant ETF in the Offing: Will It See Success?).
A Bite out of Surprise Prediction
Papa John's International Inc. (PZZA - Free Report) has a Zacks Rank #2 (Buy) and an Earnings ESP of 0.00%, making an earnings beat unlikely. However, the stock has a favorable Growth Style Score of A, though it fails on the Value score and Momentum score of D. The company is expected to report on November 1, 2016. PZZA is the top holding of BITE with 3.09% weight.
Wingstop Inc. (WING - Free Report) has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of 0.00%, again making surprise prediction difficult. WING, which is also expected to report on November 1, takes the second spot in BITE with 2.78% weight.
Jack in the Box Inc. (JACK - Free Report) has a Zacks Rank #2 and an Earnings ESP of 0.00%. The company is likely to report on November 15. JACK gets 2.75% of the fund.
El Pollo Loco Holdings Inc. (LOCO - Free Report) has a Zacks Rank #2 and an Earnings ESP of 0.00%, again putting the odds of earnings beat in jeopardy. LOCO, which is also expected to report on November 3, takes the second spot in BITE with 2.71% weight.
Bottom Line
Overall, the situation is still subdued. Only a pickup in economic growth and further improvement consumer sentiments can offer sustained relief to the sector. The fund gained about 0.4% in the last one month (as of October 24, 2016) (read: Retail Sales Recover in September: ETF & Stock Winners).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>