Back to top

Image: Bigstock

Restaurant Stocks Earnings on Jul 21: CMG, SBUX, DNKN & More

Read MoreHide Full Article

The onset of Q2 earnings has kept investors on tenterhooks, glued to the quarterly releases for stocks that are poised to beat earnings.

Per our latest  earnings preview report (as of Jul 15), 66.7% of the companies that have released their Q2 results have beaten earnings estimates while 41.7% have surpassed top-line expectations. Thus, the start to the earnings season has been encouraging so far with many companies coming out with positive earnings as well as sales surprises.

Restaurant Stocks in Focus

We note that a number of restaurant stocks are scheduled to report earnings on Jul 21 and the projections are significantly high for the group.

Improving consumer spending patterns, which in turn are positively influenced by rising wages and cheaper fuel, are likely to drive the stocks. Moreover, as dining out is usually directly proportional to consumers’ disposable income, restaurant sales are projected to rise further this quarter. However, challenges posed by detrimental international markets might drag down the top line of some of these restaurant companies.

Meanwhile, the restaurant industry belongs to the broader Retail-Wholesale sector and the space is expected to fare well this earnings season.

We note that though overall Q2 earnings for the sector are expected to be down 0.6% year over year, revenues are expected to surge 4.7%. Notably, during the first quarter, the sector witnessed an improvement of 3.6% and 6.1% in earnings and revenues, respectively.

Interestingly, last week, Yum! Brands Inc. (YUM - Free Report) posted better-than-expected second-quarter earnings results and upped its profit outlook – for the second time this year, thereby setting the tempo for other restaurant stocks.

Will the restaurant companies which are set to report their quarterly numbers on Jul 21 manage to put up a decent performance? Let’s take a look at what might be in store for them this quarter:

Chipotle Mexican Grill, Inc. (CMG - Free Report) is slated to report second-quarter 2016 results, after market close. In the last quarter, the company posted a positive earnings surprise of 16.98%. Meanwhile, the trailing four-quarter average earnings surprise stands at 8.53%.

CHIPOTLE MEXICN Price and EPS Surprise

CHIPOTLE MEXICN Price and EPS Surprise | CHIPOTLE MEXICN Quote

For the second quarter, the company has an Earnings ESP of +0.96% and a Zacks Rank #4 (Sell). The Zacks Consensus Estimate for the quarter is pegged at $1.04.

Notably, the company’s top- and bottom-line performance has been affected by the negative publicity surrounding the E. coli and norovirus outbreaks. We do not expect any significant improvement in Q2 (read more: Chipotle Q2 Earnings: Stock Likely to Disappoint?).

Leading coffee maker Starbucks Corporation (SBUX - Free Report) is set to report third-quarter fiscal 2016 results, after the closing bell. Last quarter, the company posted in-line earnings. Meanwhile, the trailing four-quarter average earnings surprise stands at 0.60%.

STARBUCKS CORP Price and EPS Surprise

STARBUCKS CORP Price and EPS Surprise | STARBUCKS CORP Quote

The company has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter is pegged at 49 cents per share.

For fiscal third quarter, adjusted earnings per share are expected in the range of 48–49 cents, representing a growth rate of 14–17%. Meanwhile, in the second quarter, though sales growth was robust in America, the same was a disappointment in Europe. We expect this trend to continue in the to-be-reported quarter as well (read more: Starbucks to Report Q3 Earnings. What's in Store?).

Dunkin' Brands Group, Inc. is scheduled to report second-quarter 2016 results, before the market opens. Last quarter, the company recorded a positive earnings surprise of 2.33%. In fact, this quick service restaurant operator has posted positive earnings surprises in each of the past four quarters with an average beat of 3.12%.

DUNKIN BRANDS Price and EPS Surprise

DUNKIN BRANDS Price and EPS Surprise | DUNKIN BRANDS Quote

The company has an Earnings ESP of 0.00% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter is pegged at 56 cents per share.

Despite the challenging international markets, menu innovation, unit expansion plans and various sales and digital initiatives should drive the company’s Q2 performance (read more: Can Dunkin' Brands Q2 Earnings Spring a Surprise?).

Domino's Pizza, Inc. (DPZ - Free Report) is scheduled to post second-quarter 2016 financial numbers, before the opening bell. Last quarter, Domino’s posted an 8.25% negative earnings surprise. In fact, the company missed the Zacks Consensus Estimate in two of the last four quarters, with an average miss of 3.67%.

DOMINOS PIZZA Price and EPS Surprise

DOMINOS PIZZA Price and EPS Surprise | DOMINOS PIZZA Quote

The company has an Earnings ESP of 0.00% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter is pegged at 93 cents per share.

Positive comps, digital ordering system, focus on re-imaging and other sales initiatives have been driving Domino's revenues for the past few quarters. We expect this positive trend to continue in Q2. However, higher labor costs and expenses related to sales initiatives, coupled with currency headwinds, will hurt profitability to some extent.

Del Frisco's Restaurant Group, Inc. is slated to release second-quarter 2016 results, before the market opens.

Last quarter, Del Frisco's Restaurant posted a 9.52% positive earnings surprise. However, the company’s trailing four-quarter average earnings surprise stands at a negative 1.57%.

DEL FRISCOS RST Price and EPS Surprise

DEL FRISCOS RST Price and EPS Surprise | DEL FRISCOS RST Quote

For Q2, the company has an Earnings ESP of -5.26% and a Zacks Rank #4. The Zacks Consensus Estimate for the quarter is pegged at 19 cents.
 
Don’t miss out on our full earnings release articles for these stocks, as the actual results might hold some surprises!

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Published in