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Restaurant Stocks' Q1 Earnings on Apr 26: BWLD, QSR, BLMN

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Total earnings for the S&P 500 companies in the fourth quarter of 2016 was the highest in two years. This momentum is expected to continue in first-quarter 2017 as well, thereby taking the growth trajectory forward.

Per the latest Earnings Preview report, 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, driven by a 4.6% rise in revenues. Notably, 72.6% of the companies that have reported their quarterly numbers surpassed earnings estimates, while 62.1% exceeded top-line expectations.

Restaurant Stocks in Focus

Coming to the restaurant industry that belongs to the broader Retail-Wholesale sector, we note that the space is not expected to fare too well this earnings season. 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, over the past few quarters, the U.S. restaurant space has not been too enticing for investors. Despite economic growth, somewhat lower energy prices and higher income, consumers increased their spending only modestly on dining out, which resulted in low consumption over the past few quarters. The situation has taken a worse turn, thanks to higher health care costs and tightened credit availability in the U.S. Evidently, same-store sales growth had been dull in a difficult sales environment and traffic too has been weak.

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 ongoing somber mood.

Thus, as the overall mood is not too alluring, individual restaurateurs have to bank upon their solid fundamentals and continual initiatives to scrape through.

Three restaurant companies are set to report their first-quarter 2017 results on Apr 26. Will these companies manage to put up a decent performance? Let’s take a look at what might be in store for these companies:

Buffalo Wild Wings Inc. missed on earnings in the last quarter. Moreover, the trailing four-quarter average earnings surprise is a negative 7.55%.

Buffalo Wild Wings, Inc. Price and EPS Surprise

Notably, our proven model shows that an earnings beat is uncertain for Buffalo Wild Wings 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.

For the quarter, the company has an Earnings ESP of -0.60% and a Zacks Rank #3, making it difficult to conclusively predict a beat. Notably, the Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.68. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We believe that the menu price increases made by Buffalo Wild Wings, along with a soft consumer spending environment in the U.S. restaurant space might continue to affect traffic trends, thereby putting the quarter’s comps under pressure. Nonetheless, the company’s efforts to revive comps growth via various digital initiatives, remodeling of existing locations, promotional offerings, focus on delivery services, better food presentation and operational efficiency are likely to somewhat boost quarterly results (read more: Buffalo Wild Wings Q1 Earnings: What's in the Cards?).

Restaurant Brands International, Inc. (QSR - Free Report) recorded a positive earnings surprise of 4.76% last quarter. In fact, the company posted positive earnings surprises in each of the past four quarters, with an average beat of 19.20%.

Restaurant Brands International Inc. Price and EPS Surprise

We note that Restaurant Brands is likely to post a beat in this quarter due to the combination of its Zacks Rank #2 and Earnings ESP of +5.71%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 35 cents.

Various sales boosting initiatives such as menu innovation, improved restaurant operations, re-imaging and promotional offerings are expected to aid first-quarter results as well. However, rising costs, along and negative currency translation, remain concerns (read more: Restaurant Brands Q1 Earnings: Another Beat in Store?).

Bloomin' Brands, Inc. (BLMN - Free Report) posted in-line earnings last quarter. However, the trailing four-quarter average earnings surprise is a negative 0.64%.

Bloomin' Brands, Inc. Price and EPS Surprise

We note that Bloomin' Brands is unlikely to post a beat in the to-be-reported quarter due to the combination of its Zacks Rank #3 and Earnings ESP of 0.00%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 52 cents.

Stay tuned! Check back on our full write-up on earnings releases of these stocks.

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