Back to top

Sales Building Efforts to Aid Wingstop's (WING) Q2 Earnings

Read MoreHide Full Article

Wingstop, Inc. (WING - Free Report) is set to report second-quarter 2018 results on Aug 2, after the closing bell.

The company’s primary strategy includes a sincere focus on top-line growth through innovation and expansion. In the first quarter of 2018, Wingstop was favored by robust revenue growth, which is expected to have continued in the to-be-reported quarter as well.

Shares of Wingstop have outperformed its industry in the past year. The stock has rallied 70.3% compared with the industry’s collective increase of 4.9%.

Let us delve deeper into the factors that might have shaped up the company’s earnings in the second quarter.


Strong Top-Line Momentum

Wingstop relies on robust top-line growth, favored by the company’s relentless focus on menu innovation and unit expansion. Various sales building initiatives have driven Wingstop’s comparable sales in the last reported quarter. In the first quarter of 2018, the company’s total system-wide sales increased 20.4% year over year, driven by 9.5% domestic same-store sales growth and a 12% increase in the number of restaurants since the first quarter of 2017.

We believe that consistent menu innovation in order to increase the customer base should have driven comparable sales in the second quarter as well. Also, the Zacks Consensus Estimate predicts domestic same sales growth of 5.4% in the second quarter while company-owned domestic sales are projected to rise 21.6% year over year.

Moreover, Wingstop’s new POS system, which integrates online orders straight to the kitchen, is expected to further bolster online ordering growth and lead to higher average check in the to-be-reported quarter. Subsequently, the consensus estimate for the to-be-reported quarter’s revenues is pegged at $37.2 million, predicting year-over-year growth of 50.8%.

Strong Margin Favors Earnings

Notably, a robust top line resulted in 31% growth in Wingstop’s adjusted EBITDA in the first quarter of 2018. Favorable pricing of menu is also helping the company see strong margins for some time now. The trend is expected to have continued in the second quarter. Owing to favorable margins, Wingstop witnessed 13.6% year-over-year growth in earnings in the first quarter of 2018. The consensus estimate for second-quarter earnings is pegged at 21 cents, suggesting growth of 16.7% from the year-ago quarter.

Our Quantitative Model Does Not Predict a Beat

Wingstop does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

Earnings ESP: The company has an Earnings ESP of -1.16%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Wingstop currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Wingstop Inc. Price and EPS Surprise

Stocks to Consider

Here are some companies in the restaurant space, which, per our model, have the right combination of elements to deliver an earnings beat this quarter.

Restaurant Brands (QSR - Free Report) currently carries a Zacks Rank #3 and has an Earnings ESP of +1.17%. It is scheduled to release second-quarter results on Aug 1, before the market opens.

With a Zacks Rank #2 (Buy), Wendy’s (WEN - Free Report) has an Earnings ESP of +1.59%. The company is slated to report its quarterly results on Aug 7, after the market closes.

Brinker (EAT - Free Report) has an Earnings ESP of +1.47% and it currently has a Zacks Rank #3. The company is expected to report quarterly results on Aug 9.

Today's Stocks From Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>



Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »

More from Zacks Analyst Blog

You May Like