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What Lies Ahead for Wingstop (WING) this Earnings Season?

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Dallas-based Wingstop, Inc. (WING - Free Report) is set to report second-quarter 2017 results on Aug 3, after the market closes. This will be the company’s ninth quarterly results after its IPO in Jun 2015.

Last quarter, this restaurant operator delivered a positive earnings surprise of 46.67%. In fact, the company has surpassed earnings estimates in each of its eight quarters, recording an average positive surprise of 17.32% in the trailing four quarters.

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

Wingstop Inc. Price and EPS Surprise


Wingstop Inc. Price and EPS Surprise | Wingstop Inc. Quote

Factors Likely to Affect Q2 Results

Wingstop, which operates as a chicken wings specialist, serves classic and boneless wings with bold flavors. We expect the company’s relentless focus on menu innovation and solid unit development to drive comps in the to-be-reported quarter.

Further, increased investments in technology to boost online ordering along with migration to a national advertising platform should drive the quarter’s results. In fact, Wingstop continues to grow its online ordering mix, and expects to sustain TV and digital presence to continue building on the momentum established in the first quarter.

Moreover, the company’s new POS system integrates online orders straight to the kitchen that is expected to further bolster online ordering growth and lead to higher average check.

However, higher labor costs and expenses related to new openings may dent the company’s profits in the to-be-reported quarter.

Notably, the first quarter witnessed an 11% increase in commodity rates for bone and chicken wings compared with the prior year period. Wingstop expects year-over-year inflation on bone and chicken wings in the second quarter to be similar to the first quarter, which is likely to further weigh on margins. Meanwhile, a choppy sales environment in the overall restaurant space might continue to limit revenue growth.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Wingstop 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: Wingstop has an Earnings ESP of +6.67%. This is because the Most Accurate estimate is 16 cents, whereas the Zacks Consensus Estimate is pegged lower at 15 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Wingstop has a Zacks Rank #4 (Sell).

As it is we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider in the broader Retail-Wholesale sector, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Alibaba Group Holding Limited (BABA - Free Report) has an Earnings ESP of +4.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

J. C. Penney Company, Inc. (JCP - Free Report) has an Earnings ESP of +142.86% and a Zacks Rank #3.

The Priceline Group Inc. has an Earnings ESP of +2.31% and a Zacks Rank #3.

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