Back to top

Image: Bigstock

Potbelly (PBPB) Q3 Earnings: Is a Disappointment in Store?

Read MoreHide Full Article

Potbelly Corporation (PBPB - Free Report) is set to report third-quarter 2017 results on Nov 3, before market opens.

Last quarter, the company missed the Zacks Consensus Estimate for earnings by 8.33%. Prior to that, this Chicago-based casual-dining restaurant’s earnings surpassed the consensus estimate in three straight quarters, with an average beat of 37.74%.

Notably, Potbelly has been plagued by a challenging operating environment in the U.S. restaurants space, which led to lower comps in the first half of 2017. In fact, this difficult industry backdrop has persisted owing to weak consumer demand coupled with food inflation. This is anticipated to dent results in the third quarter.

In fact, the consensus estimate for comps decline for the third quarter is pegged at 4.8%. Comps had declined 4.9% in the last reported quarter.

To boost the top line, the company has been undertaking various initiatives. Apart from focusing on improved digital innovation and distinguished menu offerings, the company is focused on strengthening its brand name through various advertising strategies.

In fact, in the third quarter, the company initiated television advertising which is expected to drive traffic and thereby boost sales. Additionally, the company’s continual expansion plan are expected to boost sales in the to-be-reported quarter as well.

Notably, the consensus estimate for revenues is pegged at $106.7 million, reflecting year-over-year growth of 2.8%.

However, despite cost-saving efforts, increased labor expenses due to minimum wage increases across some of the markets in which the company operates might hamper the quarter’s profitability.  

Notably, the consensus estimate for third-quarter adjusted earnings is pegged at 6 cents, reflecting a year-over-year decline of 47.9%.

Moreover, a 25% decline in third-quarter earnings estimates over the past two months reflects analysts’ pessimism over the stock.

Also, per our predictive quantitative model, Potbelly does not have the right combination of two main ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

Zacks ESP: Potbelly has an Earnings ESP of -4.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently 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.



Potbelly Corporation Price and EPS Surprise

 

 

Stocks to Consider

Here is a list of companies in the Retail-Wholesale sector, which as our model shows, have the right combination of elements to post an earnings beat this quarter.

Noodles & Company (NDLS - Free Report) has an Earnings ESP of +66.7% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Abercrombie & Fitch Company (ANF - Free Report) has an Earnings ESP of +48.94% and a Zacks Rank #3.

DineEquity, Inc. (DIN - Free Report) has an Earnings ESP of +5.14% and a Zacks Rank #3.

Zacks’ Best Private Investment Ideas

While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.

Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.

Click here for Zacks' private trades >>

Published in