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Dave & Buster's (PLAY) to Post Q2 Earnings: What's in Store?

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Dave & Buster’s Entertainment, Inc. (PLAY - Free Report) is scheduled to report second-quarter fiscal 2018 results on Sep 14, before the opening bell. In the fiscal first quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 11.8%. The bottom line also outpaced the consensus mark in each of the trailing four quarters, with an average beat of 17.6%.

How are Estimates Faring?

Let’s look at earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company prior to the release. For the quarter under review, the Zacks Consensus Estimate is pegged at 64 cents, stable over the past seven days. This reflects a decline of 9.9% from 71 cents in the year-ago quarter. Revenues are expected to be $311.5 million, up 10.9% year over year.

Factors at Play

Dave & Buster's earnings in the to-be reported quarter are likely to be impacted by higher costs. Higher labor costs due to increased wages and non-franchised model make the company susceptible to increased expenses. Since all the restaurants are owned and operated by Dave & Buster’s, instead of signing franchise agreements and putting the burden of costs onto the franchisee, the company is solely responsible for the expenses of operating the business.

Nevertheless, a unique business model, rigorous sales-building initiatives and relentless expansion plans are likely to drive the top line. Dave & Buster’s exclusive business model focuses on entertainment business, alongside food and beverage offerings. This dual model helps the company generate favorable store economics and strong return. In the first quarter of fiscal 2018, amusement and other revenues accounted for 57.9% of total revenues, proving a major reason for its success. In fact, the segment’s revenues grew 10.4% year over year.

Furthermore, menu innovation is a key attribute of the brand, and guests have responded favorably to the menu additions by the company. In the fourth quarter of fiscal 2017, Dave & Buster’s appointed a new vice president of Food and Beverage development in order to improve speed of service through menu redesign and positive simplification in the kitchen area. In February, the company streamlined its menu and reduced the number of food orders by about 20% and beverage offerings by 12% to achieve increased efficiency.

Dave & Buster's Entertainment, Inc. Price, Consensus and EPS Surprise

What Does the Zacks Model Unveil?

Our proven model does not show that Dave & Buster’s is likely to beat earnings estimates 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dave & Buster’s has an Earnings ESP of 0.00%. Although, the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

McDonald's (MCD - Free Report) reported impressive second-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of $1.99 per share exceeded the consensus mark of $1.92 by 3.6% and increased 15% from the year-ago quarter (12% in constant currencies).

Darden (DRI - Free Report)     posted better-than-expected results in fourth-quarter fiscal 2018. Adjusted earnings of $1.39 per share outpaced the consensus estimate of $1.35 by 3%.

Chipotle (CMG - Free Report) reported better-than-expected results for the second quarter of 2018. Adjusted earnings of $2.87 per share topped the Zacks Consensus Estimate of $2.78 by 3.2%.

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