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Will Jamba (JMBA) Disappoint Earnings Again This Season?

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Jamba Inc. is set to report second-quarter fiscal 2014 results on Aug 4. Last quarter, the owner and franchiser of Jamba Juice stores delivered a massive negative surprise of 200%.

In-fact, the company has delivered negative earnings surprises in three of the last four quarters with an average miss of 51.0%. Let us see how things are shaping up for this announcement.

Factors to be Considered This Quarter

Jamba Juice is currently in the phase of transitioning from existing company-owned store model to franchise-based model. As a result, the company has been experiencing flat revenues as the benefit from the growing franchise model is being offset by loss of direct revenues due to closure of company-owned stores. This is expected to continue in the second quarter as well.

However, the company is taking several initiatives to boost the top line. In the first quarter, the company introduced a revamped menu featuring whole food blending, high-end juice options and a host of new ingredients (e.g. kale, beets and cucumber). The new menu is expected to boost traffic in the to-be-reported quarter as traffic is at its peak in Jamba stores in the summer months.

Moreover, growing health consciousness among Americans and increasing demand for whole fruit smoothies should boost sales. Jamba’s exit from an underperforming business at Manhattan is expected to ease the pressure on margins this quarter.

Earnings Whispers?

Our proven model does not conclusively show that Jamba Juice is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimate. However, that is not the case here due to the following factors:

Zacks ESP: ESP for Jamba is 0.00%.

Zacks Rank: Jamba has a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are some other restaurant companies that, according to our model, have the right combination of elements to post an earnings beat this quarter:

Zoe's Kitchen, Inc. , with an Earnings ESP of +50.0% and a Zacks Rank #2.

Jack in the Box Inc. (JACK - Free Report) , with an Earnings ESP of +3.51% and a Zacks Rank #3.

Texas Roadhouse, Inc. (TXRH - Free Report) , with an Earnings ESP of +3.03% and a Zacks Rank #3.

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