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Zoe's Kitchen's (ZOES) Q2 Earnings: What's in the Cards?

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Zoe's Kitchen, Inc. (ZOES - Free Report) is slated to report second-quarter fiscal 2017 numbers on Aug 17, after market close.

Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate.  However, its trailing four-quarter average negative surprise is 4.17%.

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

Zoe's Kitchen, Inc. Price and EPS Surprise

 

Zoe's Kitchen, Inc. Price and EPS Surprise | Zoe's Kitchen, Inc. Quote

Factors Likely to Affect Q2 Results

Zoe's Kitchen that specializes in Mediterranean cuisine began trading in April 2014. After posting 28 consecutive quarters of positive comps, the company witnessed a 3.3% decrease in the same in first-quarter fiscal 2017.

Magnified traffic concerns, given the challenging restaurant environment, along with cannibalization in certain key markets, particularly hampered comps. In fact, the company expects these weak traffic trends to have continued in the to-be-reported quarter as well, thereby affecting comps.

Nevertheless, we note that Zoe's Kitchen’s extensive investments in technology to boost in-store operational capabilities and, in turn, provide a superior guest experience along with continual menu innovation and marketing to promote these new additions might drive traffic this quarter.

Additionally, increased focus on catering and delivery services as well as consistent unit expansion is also expected to somewhat bolster top-line growth.

However, increasing labor costs along with higher store operating expenses and expansive investments in sales-boosting initiatives might dent the quarter’s profitability.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Zoe's Kitchen 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: Zoe's Kitchen has an Earnings ESP of +50.00%. This is because the Most Accurate estimate is 3 cents, whereas the Zacks Consensus Estimate is pegged lower at 2 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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 (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:

Wal-Mart Stores, Inc. (WMT - Free Report) has an Earnings ESP of +0.94% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alibaba Group Holding Limited (BABA - Free Report) has an Earnings ESP of +4.11% and a Zacks Rank #3.

DSW Inc. (DSW - Free Report) has an Earnings ESP of +3.45% and a Zacks Rank #3.

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