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BJ's Restaurants (BJRI) Q3 Earnings: Cost Cutting to Aid

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BJ’s Restaurants, Inc. (BJRI - Free Report) is scheduled to report third-quarter 2018 results on Oct 30, after the market closes.

The company has been undertaking various initiatives to improve sales that are expected to have reflected in the to-be-reported quarter’s top line. Additionally, vigorous cost-containment initiatives are expected to have aided earnings in the third quarter.

Moreover, in a year’s time, shares of BJ Restaurants have rallied 103.5%, outperforming the industry’s collective increase of 6.3%.


Let’s have a look at how the company’s revenues and earnings will shape up in the to-be-reported quarter.

Revenues Likely to Grow on Sales-Building Efforts

BJ’s Restaurants has implemented several sales-building initiatives that have contributed positively to the company’s second-quarter sales and are likely to have bolstered third-quarter revenue growth as well. With increased focus on productivity and efficiency, along with a plan of balanced restaurant opening, the company is heading toward near and long-term operating success.

BJ’s Restaurants’ key needle-moving initiatives continued to drive substantial revenues in the second quarter of 2018. In 2017, the restaurant crew mastered advanced cooking methods and also became skillful in taking orders via hand-held ordering tablets. In fact, results from these initiatives have been positive so far. Notably, in the second quarter of 2018, off-premise sales increased to 7.6% of the company’s revenues. Further, BJ’s Restaurants expects this channel to grow by at least 50% over the next several years.

Coming to menu innovation, BJ’s Restaurants’ extensive focus on refining and streamlining its menu is the key driver for an improved traffic. Its slow-roasted menu, launched in 2017, has become a huge success. It has significantly boosted average check, with high incident rates. We believe that with prudent menu pricing, the company has witnessed sales growth in the third quarter as well.

Subsequent to all the rigorous efforts to drive sales, the Zacks Consensus Estimate for third-quarter revenues is pegged at $262.8 million, reflecting 6.4% year-over-year growth.

Will Earnings Benefit From Cost-Cutting Initiatives?

BJ’s Restaurants is committed to improve its operating margins through cost-containment initiatives. The company is focusing more on its smaller prototype restaurants that cost roughly $1 million less than the prior prototype. This helps in reducing operating costs. Due to lesser food wastage and improved labor productivity, these new restaurants generate higher margins. Given its operational efficiency and launch of higher return restaurant prototype, the company would continue to grow its margins.

Moreover, in 2017, the company initiated an additional $5 million of efficiency savings in areas such as sourcing, distribution, supplies and maintenance.

Owing to these efforts, the company’s restaurant-level operating margin in the second quarter of 2018 was 19%, up 120 bps from the year-ago quarter’s tally. Even earnings in the second quarter surged 61.2% year over year. We believe this upside trend to have continued in the third quarter as well. Consensus estimates for third-quarter earnings of 23 cents suggest 53.3% growth from the year-ago quarter.

Our Quantitative Model Predicts a Beat

BJ’s Restaurants have the right combination of the two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

Earnings ESP: The company has an Earnings ESP of 15.94%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BJ’s Restaurants currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

BJ's Restaurants, Inc. Price and EPS Surprise

 

Other Stocks to Consider

Here are some other companies in the restaurant space, which, per our model, have the right combination of elements to post an earnings beat this quarter.

Brinker (EAT - Free Report) has an Earnings ESP of +7.88% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Oct 30.

Cheesecake Factory (CAKE - Free Report) is slated to report quarterly results on Oct 30. The company carries a Zacks Rank #3 and has an Earnings ESP of +0.10%.

Jack in the Box (JACK - Free Report) has an Earnings ESP of +3.18% and a Zacks Rank #3. The company is expected to report quarterly numbers on Dec 5.

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