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Red Robin (RRGB) to Report Q4 Earnings: What's in Store?

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Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) is likely to register a decline in the bottom line when it reports it fourth-quarter fiscal 2020 results. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 86%.

Q4 Estimates

The Zacks Consensus Estimate for the fiscal fourth quarter bottom line is pegged at a loss of $1.29 per share. Meanwhile, the company reported a loss per share of 36 cents in the prior-year quarter. Notably, the company’s estimates remained stable over the past seven days. The consensus mark for revenues stands at nearly $205 million, suggesting a decline of 32.3% from the prior-year reported figure.

Factors to Note

Red Robin’s fiscal fourth-quarter results are likely to reflect negative impact of the coronavirus pandemic. Although the company began fourth-quarter fiscal 2020 on an encouraging note, the momentum was offset by dining room closures and capacity limitations in key states of California, Colorado, Oregon and Washington due to rise in COVID-19 cases.

In January, the company reported preliminary fourth-quarter fiscal 2020 results. For the periods ended Nov 1, Nov 27 and Dec 27, comparable restaurant revenues fell 15.4%, 28.8% and 39.5%, respectively, on a year-over-year basis. Overall, comps declined 28.9% year over year during fiscal fourth quarter. However, robust off-premise sales might have driven the company’s performance. Red Robin’s off-premise sales have more than doubled from its pre-COVID-19 levels. In fiscal fourth quarter, off-premise sales surged 132% year over year. Notably, reduction in menu items and enhancement in online food ordering website have enhanced speed and accuracy of service.

It is worth mentioning that higher costs might have weighed on the company’s fiscal fourth-quarter margins. In third-quarter fiscal 2020, restaurant-level operating profit margin came in at 8.6% compared with growth of 16.1% in the year-ago period. Restaurant labor costs (as a percentage of restaurant revenue) rose 150 basis points (bps) year over year to 37.7% in the fiscal third quarter. The increase was primarily driven by sales deleverage and higher wage rates, partially offset by lower restaurant manager incentive compensation.

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Red Robin this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Red Robin, which shares space with Jack in the Box Inc. (JACK - Free Report) , has an Earnings ESP of -12.79% and a Zacks Rank #4 (Sell), which makes the surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Zacks Retail - Restaurants space that investors may consider as our model shows that these have the right combination of elements to post earnings beat in the upcoming releases:

Darden Restaurants, Inc. (DRI - Free Report) has a Zacks Rank #3 and an Earnings ESP of +35.49%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Del Taco Restaurants, Inc. (TACO - Free Report) has an Earnings ESP of +18.52% and a Zacks Rank #3.

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