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Now that the Q1 earnings season has begun, investors are eagerly awaiting the quarterly releases to find out stocks that are poised to beat estimates.
Per the latest Earnings Preview, total earnings for the 95 S&P 500 members that have reported results (as of Apr 21) are up 14.3% from the year-ago period, courtesy of a 4.6% rise in revenues. Notably, 72.6% of the companies that have reported their quarterly numbers have surpassed earnings estimates, while 62.1% have exceeded top-line expectations.
Restaurant Stocks in Focus
The restaurant industry belongs to the broader Retail-Wholesale sector and the space is not expected to fare too well this earnings season. We note that overall first-quarter earnings for the sector are expected to be down 4.8% year over year, though revenues are expected to rise 3.3%.
In fact, the U.S. restaurant space has failed to entice investors over the past few quarters in spite of economic growth, lower energy prices and higher income. Moreover, only a modest increase in spending by the consumers on dining out resulted in low consumption. The situation took a turn for the worse due to higher health care costs and tightened credit availability in the U.S. Evidently, same-store sales growth has been dull in a difficult sales environment along with weak traffic.
Per TDn2K’s Black Box Intelligence, the first quarter of 2017 marked the fifth consecutive quarter of negative comparable sales (comps) for the restaurant industry as a whole, reflecting the somber mood.
Thus, the overall scenario is bordering on the negative and the earnings picture is also not expected to be much encouraging. Still, restaurants with solid fundamentals and innovative offerings are likely to remain unperturbed by the plight and fare well this earnings season.
Four restaurant companies are set to report their first-quarter 2017 results on Apr 25. Will these companies manage to put up a decent performance? Let’s take a look at what might be in store for these companies:
McDonald's Corp. (MCD - Free Report) posted a positive earnings surprise of 2.13%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the past 10 quarters, with the trailing four-quarter average earnings surprise coming in at 5.67%.
Notably, our proven model shows that an earnings beat is likely for McDonald's this time around. This is because the company has the right combination of the two key ingredients – a Zacks Rank #3 (Hold) or better and a positive Earnings ESP – to increase its odds of an earnings surprise.
For the quarter, the company has an Earnings ESP of +2.27% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for the quarter’s bottom line is pegged at $1.32. McDonald’s comps have improved in its key regions in the last few quarters, marking a trend that is likely to continue in Q1 as well. Increased investments in technology-driven initiatives should further drive the quarter’s top line. Still, soft industry growth could somewhat hurt sales, while negative currency translation might dent the quarter’s profits (read more: McDonald's Q1 Earnings: Another Beat in the Cards?).
Chipotle Mexican Grill, Inc. (CMG - Free Report) posted a positive earnings surprise of 1.85% last quarter. However, the trailing four-quarter average earnings surprise is a negative 10.60%.
Chipotle Mexican Grill, Inc. Price and EPS Surprise
We note that Chipotle is unlikely to post a beat in the quarter due to the combination of its Zacks Rank #3 and Earnings ESP of -2.36%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.27.
Chipotle’s new brand-management efforts along with various sales-building should aid in improving guest experience and reinstate customer affinity for the Chipotle brand. This in turn should drive its top- and bottom–line performance in the to-be-reported quarter. However, it is to be noted that Q1 should provide easy year-over-year comparisons as Chipotle was in the midst of its massive food-safety scandal this time last year (read more: Chipotle to Report Q1 Earnings: What's in the Cards?).
Panera Bread Company recorded a positive earnings surprise of 2.50% last quarter. In fact, the company posted positive earnings surprises in each of the past four quarters, with an average beat of 2.61%.
The Zacks Consensus Estimate for the quarter’s bottom line is pegged at $1.84. Notably, the company’s Panera 2.0 program, menu innovation, promotional strategies and new store design have been driving sales. We expect the trend to continue in Q1. Further, Panera’s digitally enabled larger party-sized channels should turn out to be a strong revenue growth driver in the quarter. However, high costs might impact profitability while a muted consumer spending environment in the U.S. restaurant industry might limit revenue growth (read more: Can Panera Pull Off a Surprise this Earnings Season?).
Brinker International, Inc. (EAT - Free Report) registered a 5.33% negative earnings surprise in the previous quarter. In fact, the company failed to surpass the Zacks Consensus Estimate in two of the trailing four quarters, with an average miss of 3.61%.
Brinker International, Inc. Price and EPS Surprise
We note that Brinker is unlikely to post a beat in the quarter due to the combination of its Zacks Rank #4 (Sell) and Earnings ESP of 0.00%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 85 cents.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Declining traffic trends at its restaurants might hurt the company’s comps and in turn sales. However, aggressive expansion plans along with various strategic initiatives should somewhat boost comps.
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
Image: Bigstock
Restaurant Stocks Q1 Earnings on Apr 25: MCD, CMG, PNRA, EAT
Now that the Q1 earnings season has begun, investors are eagerly awaiting the quarterly releases to find out stocks that are poised to beat estimates.
Per the latest Earnings Preview, total earnings for the 95 S&P 500 members that have reported results (as of Apr 21) are up 14.3% from the year-ago period, courtesy of a 4.6% rise in revenues. Notably, 72.6% of the companies that have reported their quarterly numbers have surpassed earnings estimates, while 62.1% have exceeded top-line expectations.
Restaurant Stocks in Focus
The restaurant industry belongs to the broader Retail-Wholesale sector and the space is not expected to fare too well this earnings season. We note that overall first-quarter earnings for the sector are expected to be down 4.8% year over year, though revenues are expected to rise 3.3%.
In fact, the U.S. restaurant space has failed to entice investors over the past few quarters in spite of economic growth, lower energy prices and higher income. Moreover, only a modest increase in spending by the consumers on dining out resulted in low consumption. The situation took a turn for the worse due to higher health care costs and tightened credit availability in the U.S. Evidently, same-store sales growth has been dull in a difficult sales environment along with weak traffic.
Per TDn2K’s Black Box Intelligence, the first quarter of 2017 marked the fifth consecutive quarter of negative comparable sales (comps) for the restaurant industry as a whole, reflecting the somber mood.
Thus, the overall scenario is bordering on the negative and the earnings picture is also not expected to be much encouraging. Still, restaurants with solid fundamentals and innovative offerings are likely to remain unperturbed by the plight and fare well this earnings season.
Four restaurant companies are set to report their first-quarter 2017 results on Apr 25. Will these companies manage to put up a decent performance? Let’s take a look at what might be in store for these companies:
McDonald's Corp. (MCD - Free Report) posted a positive earnings surprise of 2.13%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the past 10 quarters, with the trailing four-quarter average earnings surprise coming in at 5.67%.
McDonald's Corporation Price and EPS Surprise
McDonald's Corporation Price and EPS Surprise | McDonald's Corporation Quote
Notably, our proven model shows that an earnings beat is likely for McDonald's this time around. This is because the company has the right combination of the two key ingredients – a Zacks Rank #3 (Hold) or better and a positive Earnings ESP – to increase its odds of an earnings surprise.
For the quarter, the company has an Earnings ESP of +2.27% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for the quarter’s bottom line is pegged at $1.32. McDonald’s comps have improved in its key regions in the last few quarters, marking a trend that is likely to continue in Q1 as well. Increased investments in technology-driven initiatives should further drive the quarter’s top line. Still, soft industry growth could somewhat hurt sales, while negative currency translation might dent the quarter’s profits (read more: McDonald's Q1 Earnings: Another Beat in the Cards?).
Chipotle Mexican Grill, Inc. (CMG - Free Report) posted a positive earnings surprise of 1.85% last quarter. However, the trailing four-quarter average earnings surprise is a negative 10.60%.
Chipotle Mexican Grill, Inc. Price and EPS Surprise
Chipotle Mexican Grill, Inc. Price and EPS Surprise | Chipotle Mexican Grill, Inc. Quote
We note that Chipotle is unlikely to post a beat in the quarter due to the combination of its Zacks Rank #3 and Earnings ESP of -2.36%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.27.
Chipotle’s new brand-management efforts along with various sales-building should aid in improving guest experience and reinstate customer affinity for the Chipotle brand. This in turn should drive its top- and bottom–line performance in the to-be-reported quarter. However, it is to be noted that Q1 should provide easy year-over-year comparisons as Chipotle was in the midst of its massive food-safety scandal this time last year (read more: Chipotle to Report Q1 Earnings: What's in the Cards?).
Panera Bread Company recorded a positive earnings surprise of 2.50% last quarter. In fact, the company posted positive earnings surprises in each of the past four quarters, with an average beat of 2.61%.
Panera Bread Company Price and EPS Surprise
Panera Bread Company Price and EPS Surprise | Panera Bread Company Quote
We expect the company to surpass expectations in the quarter due to the combination of its Zacks Rank #3 and earnings ESP of +1.09%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for the quarter’s bottom line is pegged at $1.84. Notably, the company’s Panera 2.0 program, menu innovation, promotional strategies and new store design have been driving sales. We expect the trend to continue in Q1. Further, Panera’s digitally enabled larger party-sized channels should turn out to be a strong revenue growth driver in the quarter. However, high costs might impact profitability while a muted consumer spending environment in the U.S. restaurant industry might limit revenue growth (read more: Can Panera Pull Off a Surprise this Earnings Season?).
Brinker International, Inc. (EAT - Free Report) registered a 5.33% negative earnings surprise in the previous quarter. In fact, the company failed to surpass the Zacks Consensus Estimate in two of the trailing four quarters, with an average miss of 3.61%.
Brinker International, Inc. Price and EPS Surprise
Brinker International, Inc. Price and EPS Surprise | Brinker International, Inc. Quote
We note that Brinker is unlikely to post a beat in the quarter due to the combination of its Zacks Rank #4 (Sell) and Earnings ESP of 0.00%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 85 cents.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Declining traffic trends at its restaurants might hurt the company’s comps and in turn sales. However, aggressive expansion plans along with various strategic initiatives should somewhat boost comps.
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>