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Restaurant Stock Earnings Slated for Aug 10: WEN, SHAK, GTIM

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As the curtains are about to fall on the Q2 earnings season, let’s take a look at how the widely popular restaurant stocks have fared so far.

The restaurant industry belongs to the broader Retail-Wholesale sector and has not fared well this earnings season relative to the recent past. Notably, per our latest earnings preview article, as of Aug 5, 50% of the retail companies in the S&P 500 index have reported their results and the beat ratios for this sector have not been impressive (45.5% for earnings and 18.2% for revenues).

Thus, in spite of the high expectations for the group, most of the stocks reported below-par figures as they mainly struggled with the top line.

Limited revenue growth has hurt the performance of major players in the space like McDonald's Corp. (MCD - Free Report) , Chipotle Mexican Grill, Inc. (CMG - Free Report) , Starbucks Corporation (SBUX - Free Report) , Dunkin' Brands Group, Inc. and others.

Meanwhile, a few restaurant companies are set to report their quarterly numbers on Aug 10. Let’s take a look at what might be in store for them this quarter:

The Wendy's Company (WEN - Free Report) posted a positive earnings surprise of 83.33% last quarter. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 23.45%.

WENDYS CO/THE Price and EPS Surprise

WENDYS CO/THE Price and EPS Surprise | WENDYS CO/THE Quote

However, our proven model shows that an earnings beat is uncertain for Wendy’s this time around. This is because, according to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase its odds of an earnings surprise.

For the second quarter of 2016, the company has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). The combination makes an earnings beat unlikely. As it is, we caution against Sell-rated stocks going into the earnings announcement. Notably, the Zacks Consensus Estimate for the quarter’s earnings is pegged at 9 cents.

Though the company’s bottom line has improved due to its cost-saving initiatives, reduction in the number of company-operated restaurants has been hurting the top line. We expect the trend to continue in Q2 (read more: What's in Store for Wendy's this Earnings Season?).

Shake Shack Inc. (SHAK - Free Report) recorded a positive earnings surprise of 33.33% last quarter. Moreover, the company’s earnings outpaced the Zacks Consensus Estimate in all of the last four quarters, with an impressive average beat of 71.43%.

SHAKE SHACK INC Price and EPS Surprise

SHAKE SHACK INC Price and EPS Surprise | SHAKE SHACK INC Quote

The company has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold), making it difficult to conclusively predict an earnings beat this quarter. Meanwhile, the Zacks Consensus Estimate for the second-quarter’s earnings is pegged at 13 cents.

Menu expansion and innovation, increased traffic coupled with limited time offerings are expected to boost comps. However, elevated labor and pre-opening costs might hurt the quarters’ profits and margins (read more: Can Shake Shack Spring a Surprise in Q2 Earnings?).

Good Times Restaurants Inc. (GTIM - Free Report) registered a 28.57% positive earnings surprise in the previous quarter. Moreover, the trailing four-quarter average earnings surprise stands at a positive 5.36%.

GOOD TIMES REST Price and EPS Surprise

GOOD TIMES REST Price and EPS Surprise | GOOD TIMES REST Quote

For third-quarter fiscal 2016, the company has an Earnings ESP of -200.00% which when combined with a Zacks Rank #3, makes surprise prediction difficult. Meanwhile, the Zacks Consensus Estimate for the quarter’s bottom line is pegged at a penny per share.

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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