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Red Robin's (RRGB) Q3 Earnings: Factors Shaping the Outcome

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Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) is scheduled to report third-quarter 2018 results on Nov 6, after market close. In the second quarter of 2018, the company reported in line earnings. However, in two of the trailing four quarters, the bottom line fell short of the consensus estimate.

Q3 Expectations

The question lingering in investors’ minds now is whether Red Robin will be able to deliver a positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for third-quarter earnings is pegged at 12 cents, lower than 21 cents registered in the year-ago quarter. Notably, the company’s earnings estimates remained stable over the past 30 days. In the last reported quarter, Red Robin’s earnings declined 24.6% on a year-over-year basis.

Meanwhile, the consensus estimate for revenues stands at nearly $304.6 million, reflecting an increase of 0.1% from the prior-year figure.

Let’s delve deeper to find out how the company’s top and bottom line will shape up this earnings season.

Factors at Play

Expansion of its off-premise online-ordering business via carry-out, delivery and catering is expected to boost Red Robin’s traffic in the third quarter.

In fact, increasing demand for off-premise orders is already reflecting in its business as they ring in at a higher total check. In the second quarter of 2018, the company delivered 26.8% traffic growth in off-premise. Notably, online ordering is now available across all the company restaurants, 98% of which have call center support. Red Robin’s decision to move call-in ordering to a centralized call center is also yielding positive results.

Red Robin’s focus on prudent pricing strategies to make its menu affordable to a varied range of customers, and drive incremental traffic and sales is an added positive.

Meanwhile, the company is investing heavily in several sales building initiatives like advertising and technical upgrades, which will result in elevated costs. Remodeling and restaurant maintenance also add to the already rising expenses.

In the second quarter of 2018, restaurant-level operating profit margin contracted 150 basis points (bps) to 19.3%. The downturn was due to a 40-bps increase in the cost of sales, 90-bps rise in other restaurant operating expenses and 50-bps surge in occupancy costs.

Red Robin Gourmet Burgers, Inc. Price and Consensus

What Does the Zacks Model Says?

Our proven model does not conclusively show that Red Robin is likely to beat earnings estimates in the third 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.

Red Robin has an Earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell), which makes the surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks to Consider

Here are some companies in the Retail-Wholesale space, which per our model have the right combination of elements to post earnings beat in their respective quarters.

RH (RH - Free Report) has an Earnings ESP of +1.39% and a Zacks Rank #1. The company is expected to report quarterly results on Dec 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #3. The company is anticipated to report quarterly results on Dec 5.

American Eagle Outfitters (AEO - Free Report) has an Earnings ESP of +2.95% and a Zacks Rank #3. The company is anticipated to report quarterly results on Dec 5.

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