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What to Expect from BJ's Restaurants (BJRI) in Q2 Earnings?

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BJ's Restaurants, Inc. (BJRI - Free Report) is scheduled to report second-quarter 2017 results on Jul 27, after the market closes.

Last quarter, the company pulled off a positive earnings surprise of 23.53%. Notably, it surpassed earnings in two of the trailing four quarters, bringing the average positive surprise to 13.26%.

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

BJ's Restaurants, Inc. Price and EPS Surprise

Factors Likely to Influence Q2 Results

In order to navigate through the challenging macro environment, BJ’s Restaurants has been undertaking several major sales building initiatives. Through these, the company aims to differentiate its food quality, improve speed of service as well as leverage its broad menu in the takeout and delivery channel. This should bolster the company’s performance in the to-be-reported quarter

In fact, menu innovation, promotional offerings and aggressive marketing and operational strategies have remained strong points for BJ’s Restaurants in the past, and should drive sales in the second quarter as well.

Meanwhile, it has also invested heavily in technology-driven initiatives like digital ordering that are expected to boost sales in the quarter. Furthermore, the company is committed toward raising its operating margins through cost-containment initiatives.

Nevertheless, higher labor costs and expenses incurred to execute the initiatives are expected to keep profits under pressure. In fact, per BJ’s Restaurants’ first-quarter 2017 conference call, management expects increased food and labor costs in the to-be-reported quarter resulting in cost of sales to be around 26% or below.

Also, labor cost is expected to be about 35% of sales. Moreover, a higher marketing spend is anticipated while G&A expenses for the second quarter are projected to be in the range of $14.8 million to $15 million.

Additionally, we believe that the ongoing challenging retail environment in the U.S. restaurants space and a slowdown in the company’s unit growth plan might pressurize the company’s sales.

Earnings Whispers

Our proven model does not show that BJ's Restaurants 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. That is not the case here, as elaborated below.

Zacks ESP: BJ's Restaurants has an Earnings ESP of -1.92%. This is because the Most Accurate estimate is 51 cents, while the Zacks Consensus Estimate is pegged at 52 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BJ's Restaurants currently carries a Zacks Rank #3, which when combined with a negative  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.

Stocks to Consider

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

YUM! Brands, Inc. (YUM - Free Report) has an Earnings ESP of +1.64% and a Zacks Rank #2.

Expedia Inc. (EXPE - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Roadhouse, Inc. (TXRH - Free Report) has an Earnings ESP of +1.89% and a Zacks Rank #3.

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