Back to top

Bear of the Day: Fogo de Chao (FOGO)

Read MoreHide Full Article

Fogo de Chao FOGO owns and operates full-service Brazilian steakhouses in the United States and Brazil. It operates 31 restaurants in the United States, 10 restaurants in Brazil, and 1 joint venture restaurant in Mexico. The stock is the Bear of the Day after being downgraded to a Zacks Rank #5 (Strong Sell) and after poor earnings results last week.

Fogo has a market cap of $350 Million and a Forward PE of 14.74 The stock sports pretty good Zacks Style Scores, with an “B” in Value “B” in Growth, but a “D” in Momentum. However, a miss on EPS and a guidance cut to fiscal year 2016 has the stock trending lower.

Q2 results

The company reported Q2 EPS on August 9thth, with the numbers coming in at $0.22 versus the $0.25 expected. Revenue came in lower than expected at $69.6 Million against the $73.3 Million expected. The company also cut their fiscal year 2016 outlook to $0.85-0.89 verse the $0.94 expected. In addition, revenue and same store sales were guided lower.

CEO Lawrence Johnson had some comments on the quarter: “In today’s softening sales environment, guests are placing greater emphasis on value, customization, variety and speed of service and we believe that our strategies are designed to deliver on these needs.

Investors weren’t buying the comment that strategies are delivering and have sold the stock down 10% since the report. Analysts aren’t buying the story either and have been cutting estimates.

Estimate Revisions

Over the last 30 days, estimates have been revised lower for all time frames. For fiscal year 2016, the numbers have been taken down 8%, from $0.94 to $0.86. For 2017, estimates are now seen at $0.97, down from $1.11 or 13%.

A Better Option

Denny Corp (DENN - Free Report) is a Zacks Rank #2 (Buy) that operates Denny’s, Hardee’s, Quincy’s and other moderately priced restaurants. The company was founded in 1953, has 8,500 employees and is headquartered in Spartanburg, South Carolina.

Denny’s has a market cap of $800 Million and a Forward PE of 21. The stock sports Zacks Style Scores of “B” in Value, “A” in Growth, and “C” in Momentum.

On August 3rd the company raised adjusted EBITDA for the year, despite the challenging full-service dining environment. Estimates for the company in 2016 have been pretty steady, but are ticking 1.7% higher for fiscal year 2017.

Note: Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.

So Where Are the Profitable Trades?

Be sure to short or avoid this Bear Stock of the Day. Now would you like to see Zacks' recommendations that have the best profit potential? Starting today, for the next month, you can follow all our private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for all Zacks trades >>

Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Denny's Corporation (DENN) - free report >>

More from Zacks Bear of the Day

You May Like