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Key Predictions for Earnings Reports of SHAK, CAKE, EAT
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The Q3 earnings season is well under way with 272 of the S&P 500 members having already reported their quarterly numbers (as of Oct 27).
Per the Earnings Preview, total earnings for these 272 companies are up a solid 8.7% from the year-ago quarter, courtesy a 6.7% rise in revenues. While, 75.7% of the companies that have reported their quarterly numbers surpassed earnings estimate, 66.2% exceeded top-line expectations.
Turning our focus to the widely popular restaurant industry, we note that the performance of the players here has been mixed so far this earnings season.
Among the restaurant stocks that have reported, Domino’s Pizza Inc. (DPZ - Free Report) posted robust results beating earnings and revenue estimates. Meanwhile, McDonald’s Corporation (MCD - Free Report) posted mixed third-quarter 2017 results. While earnings surpassed the Zacks Consensus Estimate, revenues fell short of the same. However, Chipotle Mexican Grill, Inc. (CMG - Free Report) lagged on both fronts.
A soft consumer spending environment in the U.S. restaurant space along with rising costs are continuing to haunt restaurant chains. Also, the recent hurricanes seem to have impacted results for a number of restaurant companies in the quarter including the likes of BJ’s Restaurants, Inc. (BJRI - Free Report) that reported lower-than-expected results in third-quarter fiscal 2017.
Nonetheless, innovative operators with strong fundamentals are continuing to exhibit strength even in a not-so-favorable environment.
Markedly, the three restaurant companies that are set to report their quarterly results on Nov 1, have a significant exposure to the hurricane affected areas. This may result in sales decline in the quarter due to destruction caused by the same.
Despite these headwinds, will these companies manage to put up a decent performance? Let’s take a look at what might be in store for these companies:
Shake Shack Inc. (SHAK - Free Report) delivered a positive earnings surprise of 25.00% in the last reported quarter. In fact, it outpaced/met earnings estimates in the trailing four quarters, with an average beat of 12.50%.
Our proven model does not conclusively show earnings beat for Shake Shack this quarter. This is because, according to our quantitative model, a company needs the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase its odds of an earnings surprise.
For the third quarter of 2017, the company has an Earnings ESP of -4.25% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Notably, the Zacks Consensus Estimate for the quarter's earnings is pegged at 15 cents, reflecting an increase of 1% over the prior-year quarter. Also, revenues are expected to improve 27.2% year over year to $94.9 million. An increase in Shack sales and licensing revenues are likely to aid the top line in the quarter. In fact, the consensus estimate of $92 million for Shack sales and $3.4 million for licensing revenues in the quarter, reflects a year-over-year improvement of 27.8% and 24.8%, respectively.
Apart from the adverse affects of the hurricanes, a soft consumer spending environment in the U.S. restaurant space might limit revenue growth and hurt comps. Notably, the Zacks Consensus Estimate calls for the quarter’s comps to witness a decline of 2.5%. Comps grew 2.9% in the year-ago quarter (read more: Will Higher Revenues Drive Shake Shack's Q3 Earnings?).
The Cheesecake Factory Inc. (CAKE - Free Report) pulled off a positive earnings surprise of 2.63%. In fact, the company witnessed earnings beat/meet in three of the trailing four quarters, with an average positive surprise of 4.00%.
The Cheesecake Factory Incorporated Price and EPS Surprise
We note that Cheesecake Factory is unlikely to post a beat in the third-quarter fiscal 2017 due to the combination of its Zacks Rank #4 (Sell) and an Earnings ESP of -2.29%.
As it is 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.
Higher labor costs, pre-opening costs of outlets and expenses related with the execution of the initiatives are expected to keep profits under pressure. Markedly, the consensus estimate for earnings is pegged at 60 cents, reflecting a year-over-year decline of 13.7%. Nevertheless, the company's initiatives to boost sales and traffic are likely to somewhat boost comps and drive the top line. Besides, the consensus estimate for the quarter's sales is projected at $562.8 million, reflecting a 0.5% year-over-year increase.
Meanwhile, in addition to the hurricane woes, Cheesecake factory is plagued by declining sales given a soft industry backdrop. In fact, the company expects a 1% to 2% decline in comps for the to-be-reported quarter. Moreover, the Zacks Consensus Estimate for comps decline is pegged at 1.6%. In the year-ago quarter, the company witnessed comps growth of 1.7% (read more: Will Soft Comps Hurt Cheesecake Factory Q3 Earnings?).
Brinker International, Inc. (EAT - Free Report) came up with a 3.81% positive earnings surprise in the previous quarter. However, the trailing four-quarter average earnings surprise is a negative 0.46%.
Brinker International, Inc. Price and EPS Surprise
Higher labor costs along with costs related to various sales boosting initiatives including advertising expenses are expected to continue to keep profits under pressure. The consensus estimate for the quarter’s earnings is pegged at 44 cents, representing a year-over-year decrease of 11.2%. The same for revenues is projected to be $756.5 million, down a slight 0.3% from the prior-year quarter.
Though aggressive expansion plans along with various strategic initiatives are expected to somewhat boost comps, declining traffic trends at its restaurants might hurt the same and in turn sales. Meanwhile, the consensus estimate calls for Chili's company-owned comps to witness a decline of 0.02% in the quarter. Comps fell 1.4% in the year-ago quarter.
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
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Key Predictions for Earnings Reports of SHAK, CAKE, EAT
The Q3 earnings season is well under way with 272 of the S&P 500 members having already reported their quarterly numbers (as of Oct 27).
Per the Earnings Preview, total earnings for these 272 companies are up a solid 8.7% from the year-ago quarter, courtesy a 6.7% rise in revenues. While, 75.7% of the companies that have reported their quarterly numbers surpassed earnings estimate, 66.2% exceeded top-line expectations.
Turning our focus to the widely popular restaurant industry, we note that the performance of the players here has been mixed so far this earnings season.
Among the restaurant stocks that have reported, Domino’s Pizza Inc. (DPZ - Free Report) posted robust results beating earnings and revenue estimates. Meanwhile, McDonald’s Corporation (MCD - Free Report) posted mixed third-quarter 2017 results. While earnings surpassed the Zacks Consensus Estimate, revenues fell short of the same. However, Chipotle Mexican Grill, Inc. (CMG - Free Report) lagged on both fronts.
A soft consumer spending environment in the U.S. restaurant space along with rising costs are continuing to haunt restaurant chains. Also, the recent hurricanes seem to have impacted results for a number of restaurant companies in the quarter including the likes of BJ’s Restaurants, Inc. (BJRI - Free Report) that reported lower-than-expected results in third-quarter fiscal 2017.
Nonetheless, innovative operators with strong fundamentals are continuing to exhibit strength even in a not-so-favorable environment.
Markedly, the three restaurant companies that are set to report their quarterly results on Nov 1, have a significant exposure to the hurricane affected areas. This may result in sales decline in the quarter due to destruction caused by the same.
Despite these headwinds, will these companies manage to put up a decent performance? Let’s take a look at what might be in store for these companies:
Shake Shack Inc. (SHAK - Free Report) delivered a positive earnings surprise of 25.00% in the last reported quarter. In fact, it outpaced/met earnings estimates in the trailing four quarters, with an average beat of 12.50%.
Shake Shack, Inc. Price and EPS Surprise
Shake Shack, Inc. Price and EPS Surprise | Shake Shack, Inc. Quote
Our proven model does not conclusively show earnings beat for Shake Shack this quarter. This is because, according to our quantitative model, a company needs the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase its odds of an earnings surprise.
For the third quarter of 2017, the company has an Earnings ESP of -4.25% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Notably, the Zacks Consensus Estimate for the quarter's earnings is pegged at 15 cents, reflecting an increase of 1% over the prior-year quarter. Also, revenues are expected to improve 27.2% year over year to $94.9 million. An increase in Shack sales and licensing revenues are likely to aid the top line in the quarter. In fact, the consensus estimate of $92 million for Shack sales and $3.4 million for licensing revenues in the quarter, reflects a year-over-year improvement of 27.8% and 24.8%, respectively.
Apart from the adverse affects of the hurricanes, a soft consumer spending environment in the U.S. restaurant space might limit revenue growth and hurt comps. Notably, the Zacks Consensus Estimate calls for the quarter’s comps to witness a decline of 2.5%. Comps grew 2.9% in the year-ago quarter (read more: Will Higher Revenues Drive Shake Shack's Q3 Earnings?).
The Cheesecake Factory Inc. (CAKE - Free Report) pulled off a positive earnings surprise of 2.63%. In fact, the company witnessed earnings beat/meet in three of the trailing four quarters, with an average positive surprise of 4.00%.
The Cheesecake Factory Incorporated Price and EPS Surprise
The Cheesecake Factory Incorporated Price and EPS Surprise | The Cheesecake Factory Incorporated Quote
We note that Cheesecake Factory is unlikely to post a beat in the third-quarter fiscal 2017 due to the combination of its Zacks Rank #4 (Sell) and an Earnings ESP of -2.29%.
As it is 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.
Higher labor costs, pre-opening costs of outlets and expenses related with the execution of the initiatives are expected to keep profits under pressure. Markedly, the consensus estimate for earnings is pegged at 60 cents, reflecting a year-over-year decline of 13.7%. Nevertheless, the company's initiatives to boost sales and traffic are likely to somewhat boost comps and drive the top line. Besides, the consensus estimate for the quarter's sales is projected at $562.8 million, reflecting a 0.5% year-over-year increase.
Meanwhile, in addition to the hurricane woes, Cheesecake factory is plagued by declining sales given a soft industry backdrop. In fact, the company expects a 1% to 2% decline in comps for the to-be-reported quarter. Moreover, the Zacks Consensus Estimate for comps decline is pegged at 1.6%. In the year-ago quarter, the company witnessed comps growth of 1.7% (read more: Will Soft Comps Hurt Cheesecake Factory Q3 Earnings?).
Brinker International, Inc. (EAT - Free Report) came up with a 3.81% positive earnings surprise in the previous quarter. However, the trailing four-quarter average earnings surprise is a negative 0.46%.
Brinker International, Inc. Price and EPS Surprise
Brinker International, Inc. Price and EPS Surprise | Brinker International, Inc. Quote
For the first quarter of fiscal 2018, we cannot conclusively predict an earnings beat as the company has an Earnings ESP of -3.45%, and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Higher labor costs along with costs related to various sales boosting initiatives including advertising expenses are expected to continue to keep profits under pressure. The consensus estimate for the quarter’s earnings is pegged at 44 cents, representing a year-over-year decrease of 11.2%. The same for revenues is projected to be $756.5 million, down a slight 0.3% from the prior-year quarter.
Though aggressive expansion plans along with various strategic initiatives are expected to somewhat boost comps, declining traffic trends at its restaurants might hurt the same and in turn sales. Meanwhile, the consensus estimate calls for Chili's company-owned comps to witness a decline of 0.02% in the quarter. Comps fell 1.4% in the year-ago quarter.
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>