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What to Expect From Zoe's Kitchen (ZOES) in Q1 Earnings?

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Zoe's Kitchen, Inc.  is slated to report first-quarter 2018 results on May 24, after market close.

The company’s earnings surprise history has not been impressive, as it delivered an average negative surprise of 38.89% in the trailing four quarters. Also, estimates for the to-be-reported quarter have moved from break-even earnings to a loss of a penny in the past month, indicating analysts’ doubt surrounding the future potential of the company’s earnings.

Moreover, Zoe’s Kitchen’s shares have lost 8.5% in the past year, underperforming the industry’s gain of 3.7%.


Factors Likely to Shape Up First-Quarter Results

The company’s total revenues in 2017 increased 13.8% year over year on several unit openings.The trend is likely to continue in the to-be-reported quarter as well, buoyed by consistent unit expansion, along with the increased focus on catering and delivery services. The Zacks Consensus Estimate for first-quarter revenues is pegged at $105.09 million, reflecting 16% year-over-year growth.

The company is investing heavily on menu innovation, which is likely to have aided its revenues in the to-be-reported quarter as well. In 2017, Zoe’s Kitchen completed the largest menu rollout that featured Lamb Kafta, bowls with cauliflower rice and power grains, revamped pita sandwiches, and four new sauces highlighting Mediterranean ingredients and flavors.

However, menu innovation and the increased focus on other operations are also weighing on the company’s margins. Moreover, owing to increased labor and other operating costs, the company witnessed a 16.1% year-over-year increase in operating expenses in 2017, and the trend is likely to have continued in the first quarter as well. Profits in the to-be-reported quarter, therefore, are likely to have been hurt.

Subsequently, the consensus estimate for the first quarter predicts a loss of a penny, suggesting a 200% decline from the year-ago quarter.

Peer Releases

Darden (DRI - Free Report) , carrying a Zacks Rank #3 (Hold), reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of higher revenues. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Restaurant Brands’ (QSR - Free Report) first-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, growing 86.1% from the prior-year quarter.

Chipotle’s (CMG - Free Report) first-quarter 2018 earnings surpassed expectations while revenues were in line with the same. Adjusted earnings of $2.13 grew 33.1% from the year-ago quarter driven by higher revenues and lower food costs.

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