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BJ's Restaurants (BJRI) on Fire: What's Driving the Stock?

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In an intensely competitive Restaurant industry, BJ's Restaurants, Inc. (BJRI - Free Report) has done exceedingly well and has emerged as an attractive investment option. This is quite evident from the stock’s performance in a year. Shares of the company have surged 114.9% compared with the industry’s 17.2% rally.

We believe there is still a momentum left in this Zacks Rank #2 (Buy) company. This is because the stock has a projected earnings growth rate of 29.7% and 11.9% for fourth-quarter 2018 and first-quarter 2019, respectively. Moreover, it exhibits a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from BJ's Restaurants, stocks such as Darden Restaurants, Inc. (DRI - Free Report) , Dunkin' Brands Group, Inc. (DNKN - Free Report) and Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , which belong to the same industry, have gained 37.7%, 35.2% and 24.7%, respectively, in a year. Let’s delve deeper and find out the reason that kept BJ's Restaurants ahead of its peers.

Factors Driving Growth

Sharp increase in share price over the past year can be primarily attributed to better-than-expected earnings in all quarters. The past four-quarter average beat is 33.2%. Given its progress on the fundamentals, the stock should keep performing well in the quarters ahead. Earnings estimates for the current year have also climbed 9.4% in a month’s time, reflecting analysts’ optimism surrounding the company’s earnings potential.

Furthermore, BJ’s Restaurants has implemented several major sales-building initiatives, which have contributed positively to the company’s results over the past few quarters. With increased focus on productivity and efficiency along with a plan for balanced restaurant opening, the company is further heading toward near- and long-term operating success.

In 2017, the restaurant crew mastered advanced cooking methods and also became skillful in taking orders via hand-held ordering tablets. In fact, results from these initiatives have been positive so far. In the third quarter of 2018, off-premise sales increased to 8.7% of the company’s revenues. BJ’s Restaurants expects this channel to grow by at least 50% over the next several years. In 2019, the company intends to open seven to nine restaurants.

Meanwhile, BJ’s Restaurants’ extensive focus on refining and streamlining its menu is acting as a key catalyst for improved traffic.  Additionally, the restaurant is developing a robust pipeline of new menu items, focusing on its EnLIGHTened menu category, featuring its new super food options.

Moving ahead, the company plans to introduce new flavors and improve the quality of its menu items. Notably, BJ’s Restaurants’ higher-priced menu items continue to be popular and management believes that these items are likely to boost check in the near term. In fact, the company expects to offset labor pressure through prudent menu pricing and design.

Also, the digital wave has hit the U.S. fast casual restaurant sector. More and more restaurants are deploying technology to enhance guest experience. In this regard, BJ’s Restaurants’ heavy investment in technology-driven initiatives, like digital ordering, to boost sales is encouraging.

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