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Will BJ's Restaurants Miss on Earnings?

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BJ’s Restaurants Inc. (BJRI - Free Report) prepares to release its first-quarter 2013 results after the closing bell on Thursday, Apr 25. Last quarter BJ’s Restaurants’ earnings were in line with the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

Continuous decline in comparable restaurant sales (comps) and increasing cost may hurt the company’s performance in the first quarter.

BJ’s Restaurants’ same-store sales growth has been sluggish in the past two quarters. Even in the first seven weeks of first-quarter 2013, comps were down 0.5% in contrast to a positive 4% for the same period last year. Moreover, with higher payroll taxes, delayed tax refund and increased gasoline prices, the sales environment is also expected to remain choppy, as consumer spending is low.

BJ’s Restaurants’ top-line growth is driven by several sales-building measures, which are pushing up its cost structure. Management expects the higher marketing spends to continue in the first quarter of 2013. We believe that the continuous increase in costs will act as a major headwind for BJ’s Restaurants’ profits in the to-be-reported quarter.

The Zacks Consensus Estimate for 2013 and 2014 has moved down mostly over the last 60 days.

Earnings Whispers?

Our proven model does not conclusively show that BJ’s Restaurants is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: The Most Accurate Estimate stands at 26 cents per share while the Zacks Consensus Estimate is higher at 28 cents per share. That is a difference of -7.14%.

Zacks Rank #5 (Strong Sell): BJ’s Restaurants carries a Zacks Rank #5 (Strong Sell). We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing  negative estimate revisions momentum which is exactly the case with BJ’s Restaurants.

Other Stocks to Consider

Here are some other restaurant companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

The Cheesecake Factory Incorporated (CAKE - Free Report) , Earnings ESP of +2.38% and a Zacks Rank #3 (Hold)

Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) , Earnings ESP of +1.06% and a Zacks Rank #1 (Strong Buy)

Dunkin' Brands Group, Inc. (DNKN - Free Report) , Earnings ESP of +6.90% and a Zacks Rank #3 (Hold)

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