Will Noodles & Company (NDLS) Earnings Miss Estimates? - Analyst Blog
Noodles & Company NDLS is set to report first quarter 2015 results on May 5, after the markets close. Last quarter, the company posted a negative earnings surprise of 7.14%. The company has a four-quarter negative average earnings surprise of 8.45%. Let us see what is in store for the company this quarter.
Factors to Consider
Noodles & Company expects earnings per share in the first quarter to be flat to modestly up compared to the prior-year period. In fact, the company’s profits have been hurt by higher costs and expenses and declining margins in the past few quarters. Costs related to marketing and catering initiatives continue to hurt profits. Going forward, higher advertising expenditure would add to the woes. Given the scenario, we expect profits to remain under pressure in the upcoming quarters.
Meanwhile, food costs inflation is expected to continue to dent profits. This noodles and pasta maker company expects commodity inflation in the range of approximately 1.5% to 2% during 2015 owing to an increase in the price of durum wheat, which increases the cost of pasta.
On the other hand, comps have remained quite sluggish over the past few quarters due to lower traffic. Given inclement weather in the U.S., traffic would remain weak in the soon-to-be reported quarter. Notably, the company states that revenue per restaurant is typically lower in the first and fourth quarters of the year.
Earnings Whispers?
Our proven model does not conclusively show that Noodles & Company is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for Noodles & Company stands at -20.00%. This is because the Most Accurate estimate stands at 4 cents while the Zacks Consensus Estimate is pegged higher at 5 cents per share.
Zacks Rank: Noodles & Company presently has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies in the restaurant industry that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Red Robin Gourmet Burgers Inc. RRGB with an Earnings ESP of +4.55% and a Zacks Rank #2 (Buy).
Bloomin' Brands, Inc. BLMN with an Earnings ESP of +1.85% and a Zacks Rank #3 (Hold).
Chuy's Holdings, Inc. CHUY with an Earnings ESP of +6.25% and a Zacks Rank #3.
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NOODLES & CO (NDLS): Free Stock Analysis Report
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