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Restaurant Stocks' Q2 Earnings on Aug 4: QSR, WING & More

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As the Q2 earnings season is drawing to a close, let’s take a look at how the widely popular restaurant stocks have fared so far.

We note that in spite of the high expectations for the group, most of the stocks reported below-par figures as they have mainly struggled with the top line this earnings season.

McDonald's Corp. (MCD - Free Report) posted weaker-than-expected Q2 results. Though the company recorded positive comps growth across all its segments, it was lower than the preceding quarter due to soft industry growth. Currency headwinds also kept profits under pressure.

Chipotle Mexican Grill, Inc.’s (CMG - Free Report) second-quarter results were marred by the continued food-safety issues. Starbucks Corporation’s (SBUX - Free Report) third-quarter fiscal 2016 sales growth also disappointed investors.

Meanwhile, though Dunkin' Brands Group, Inc.’s earnings beat estimates, a decrease in sales at company-operated restaurants as well as dwindling ice cream and other products revenues limited top-line growth at the company.

A number of restaurant companies are set to report their quarterly numbers on Aug 4. Let’s take a look at what might be in store for them this quarter:

Restaurant Brands International Inc. (QSR - Free Report) posted a positive earnings surprise of 50.00% last quarter. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 17.63%.

RESTAURANT BRND Price and EPS Surprise

RESTAURANT BRND Price and EPS Surprise | RESTAURANT BRND Quote

For the second quarter, the company has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter’s earnings is pegged at 35 cents.

Menu innovation, re-imaging and premium offerings have been driving comps growth over the past few quarters. We expect the trend to continue in Q2. However, costs incurred to execute the sales initiatives might continue to hurt profits (read more: Restaurant Brands Q2 Earnings: What's in Store?).

Wingstop Inc. (WING - Free Report) recorded a positive earnings surprise of 14.29% last quarter. Moreover, the company posted positive earnings surprises in all of the past four quarters, with an average beat of 19.23%.

WINGSTOP INC Price and EPS Surprise

WINGSTOP INC Price and EPS Surprise | WINGSTOP INC Quote

The company has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell) for the second quarter of 2016. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 14 cents.

We expect the company’s enviable streak of positive comps for 12 years to continue in the to-be-reported quarter as well, backed by menu innovation and unit growth. However, higher costs and expenses might dent profits (read more: Wingstop Q2 Earnings: What to Expect?).

El Pollo Loco Holdings, Inc. (LOCO - Free Report) registered a 5.56% negative earnings surprise in the previous quarter. However, the company’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 8.85%.

EL POLLO LOCO Price and EPS Surprise

EL POLLO LOCO Price and EPS Surprise | EL POLLO LOCO Quote

The company has an Earnings ESP of +5.56% and a Zacks Rank #4 for the second quarter. The Zacks Consensus Estimate for the quarter’s bottom line is pegged at 18 cents.

We expect the company’s trend of posting positive comps for 19 consecutive quarters, on the back of various sales and digital initiatives, to continue in the to-be-reported quarter. However, higher costs and expenses related to sales initiatives might mar profits (read more: El Pollo Loco Q2 Earnings: What's in the Cards?).

Noodles & Company (NDLS - Free Report) recorded a positive earnings surprise of 14.29% in the preceding quarter. However, the trailing four-quarter average earnings surprise stands at a negative 34.13%.

NOODLES & CO Price and EPS Surprise

NOODLES & CO Price and EPS Surprise | NOODLES & CO Quote

The company has an Earnings ESP of 0.00% and a Zacks Rank #4. The Zacks Consensus Estimate for the quarter is pegged at a loss of 2 cents per share.

Higher costs and expenses have been hurting profits over the past few quarters. We do not expect any significant improvement in Q2. Nonetheless, menu innovation, increased focus on catering coupled with various sales and digital initiatives should boost comps (read more: Noodles & Company Q2 Earnings: What to Expect?).

Don’t miss out on our full earnings release articles for these stocks, as the actual results might hold some surprises!

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