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Zoe's Kitchen (ZOES) Q3 Earnings Preview: What to Expect?

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Zoe's Kitchen, Inc. is scheduled to report third-quarter 2016 numbers on Nov 14, after the market closes.

Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate. In fact, it met/surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 41.67%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

Zoe's Kitchen began trading in Apr 2014. This fast casual restaurant specializing in Mediterranean cuisine has posted better-than-expected or in-line revenues and earnings in all of the quarters so far, except for the last reported quarter where revenues fell below expectations.

Comps improved in all the previous quarters backed by improved traffic and an increase in product mix. In fact, the second quarter of 2016 marked the company’s 26th consecutive quarter of positive comps. We expect the trend to have continued in the to-be-reported quarter as well, given the company’s increased focus on menu innovation and marketing and promotional campaigns to promote these items. Moreover, increased focus on catering and unit expansion should drive top-line growth. Meanwhile, various cost savings initiatives undertaken by the company are likely to boost third-quarter earnings.

However, increasing labor costs along with higher store operating expenses may dent the company’s profits in the to-be-reported quarter. Furthermore, the industry’s slower traffic trend, along with heavy and prolonged discounting remains a potent headwind for the top line.

ZOES KITCHEN Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that Zoe's Kitchen is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Zoe's Kitchen has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 4 cents.

Zacks Rank: Zoe's Kitchen has a Zacks Rank #4 (Sell). As it is we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Best Buy Co., Inc. (BBY - Free Report) has an Earnings ESP of +4.26% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dave & Buster's Entertainment, Inc. (PLAY - Free Report) has an Earnings ESP of +15.39% and a Zacks Rank #3.

Wal-Mart Stores Inc. (WMT - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #3.

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