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What to Expect from Habit Restaurants (HABT) in Q1 Earnings?

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The Habit Restaurants, Inc. is set to report first-quarter 2017 results on May 3, after the market closes.

Last quarter, the casual restaurant company posted a positive earnings surprise of 75%. Moreover, the trailing four-quarter average earning surprise stands at a positive12.08%.

The Habit Restaurants, Inc. Price and EPS Surprise

Let’s see what is in store this quarter.

Factors at Play

Habit Restaurants offers specialty sandwiches, fresh salads, shakes and malts. The fourth quarter of 2016 marked the company’s 52nd consecutive year-over-year growth in comps. The company expects its differentiated brand positioning, successful marketing and culinary innovations, excellent operational execution, high quality Limited Time Offers, targeted digital strategies and innovative media partnerships to help in retaining brand loyalty and thereby drive comps in the to-be-reported quarter. Notably, per the fourth quarter conference call, management anticipated comps to be flat to slightly positive in the first quarter.

Also, it updated the menu with three new items in the same period, which are likely to drive sales in the to-be-reported quarter.  

Meanwhile, though the company is looking to expand its presence via new unit openings, an increase in expenses related to pre-opening costs and the development and management of new units may dent the quarter’s profits. Incremental investments in marketing programs and promotional activity as well as consistently higher labor expenses are also expected to weigh on margins. Moreover, a choppy sales environment in the overall restaurant space might limit revenue growth.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Habit Restaurants 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. That is not the case here, as you will see below.

Zacks ESP: Habit Restaurants has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 8 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks Rank: Habit Restaurants carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks to Consider

Here are some companies in the broader Retail-Wholesale sector that investors may consider, as our model shows that 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 +12.50% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jack in the Box, Inc. (JACK - Free Report) has an Earnings ESP of +4.40% and a Zacks Rank #2.

Wingstop, Inc. (WING - Free Report) has an Earnings ESP of +6.67% and a Zacks Rank #3.

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