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BJ's Restaurants (BJRI) Down 8.3% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for BJ's Restaurants (BJRI - Free Report) . Shares have lost about 8.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is BJ's Restaurants due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

BJ's Restaurants Q3 Earnings & Revenues Top Estimates

BJ’s Restaurants' reported impressive third-quarter 2018 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate. With this, the top line exceeded the consensus mark for four straight quarters, while the bottom line outpaced the same for five consecutive quarters.

Adjusted earnings of 39 cents surpassed the Zacks Consensus Estimate of 23 cents by 69.6%. Backed by improved comps and restaurant operating margins, the bottom line surged 160% on a year-over-year basis. Total quarterly revenues came in at $270.3 million, which trumped the consensus estimate of $263 million by 2.8%. The top line also grew 9.4% year over year driven by increased guest traffic and comps.

Comparable restaurant sales in the quarter increased 6.9%, which marks the highest growth in the last 29 quarters. The uptick was driven by a 2.6% increase in guest traffic and rise in average check. Notably, comps growth compared favorably with a 5.6% increase in the second quarter of 2018 and a 1.7% decrease in the year-ago quarter. The company said that robust sales building efforts and marketing efficiency will continue to drive comps in the fourth quarter.

Expenses & Operating Margins

Labor costs, as a percentage of sales, decreased 20 basis points (bps) to 36.7% in the third quarter, while occupancy and operating costs were 22.6%, up 20 bps year over year.

Restaurant-level operating margin was 15.4%, up 120 bps from the year-ago quarter number. In order to counter high costs prevalent in the industry, the company is undertaking various cost-saving and efficiency initiatives to drive margins.

Balance Sheet

As of Oct 2, 2018, cash and cash equivalents totaled $25.6 million compared with $24.3 million on Jan 2, 2018.

Total debt declined to $95 million at the end of quarter from $163.5 million as of 2017 end.

BJ's Restaurants raised the quarterly cash dividend by 9.1% to 12 cents, payable Nov 26, 2018 to its shareholders of record at the close of business on Nov 12, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 12.63% due to these changes.

VGM Scores

Currently, BJ's Restaurants has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise BJ's Restaurants has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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