The Zacks Analyst Blog Highlights: Yum! Brands, Chipotle Mexican Grill, Kona Grill and Buffalo Wild Wings - Press Releases
For Immediate Release
Chicago, IL – February 03, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Yum! Brands, Inc. (YUM-Free Report), Chipotle Mexican Grill, Inc. (CMG-Free Report), Kona Grill Inc. (KONA-Free Report) and Buffalo Wild Wings Inc. (BWLD-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday’s Analyst Blog:
Will China Woes Hurt Yum Brands' (YUM) Q4 Earnings?
Louisville-based restaurant chain Yum! Brands, Inc. (YUM-Free Report) is set to report fourth-quarter and full-year 2014 results on Feb 4.
In the last quarter, the company’s posted a positive earnings surprise of 1.16% helped largely by a lower tax rate as well as decline in total costs and interest expenses. Let’s see how things are shaping up for this announcement.
Factors to Consider
We believe that it will be difficult for Yum! to record positive comps growth in the Chinese division in the fourth quarter, given the negative publicity in Jul 2014 on account of improper food handling practices by its former supplier, Shanghai Husi Food Co. – a division of OSI Group LLC. Shanghai Husi was reportedly found reusing meat that had fallen on the factory floor as well as mixing fresh and expired meat. This affected consumer confidence, thereby lowering comps in the months that followed.
In fact, the company lowered the 2014 earnings guidance while reporting the third-quarter results, as it believed that revenues from China should take six to nine months to recover. It further stated that despite improvement, comps are likely to remain in the negative in the fourth quarter as well. Since the scandal, the company has been witnessing sales declines at its KFC and Pizza Hut units in China.
However, we believe that the company’s U.S. division is likely poised to post a turnaround this quarter. Taco Bell’s breakfast platform is expected to continue to drive comps in the to-be-reported quarter, while comps in the Pizza Hut division will likely grow backed by the massive makeover which took place in Nov 2014.
This overhaul, which included new crust flavours, sauces, and toppings, combined with healthy menu items and giving its logo a facelift, and revamped employee uniforms and packaging. In addition, the company modernized its online ordering platform too. Such efforts will likely lead to higher comps in the coming quarter, especially at a time when the U.S. fast-casual pizza industry is growing by leaps and bounds.
Earnings Whispers
Our proven model does not conclusively show that Yum! 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: The company’s Earnings ESP stands at +1.54%. This is because the Most Accurate estimate is 66 cents, while the Zacks Consensus Estimate is pegged at 65 cents.
Zacks Rank: Yum! has a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement.
Stocks to Consider
Here are some companies in the restaurant sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Chipotle Mexican Grill, Inc. (CMG-Free Report), with an Earnings ESP of +2.38% and a Zacks Rank #2 (Buy).
Kona Grill Inc. (KONA-Free Report) with an Earnings ESP of +11.11% and a Zacks Rank #1 (Strong Buy).
Buffalo Wild Wings Inc. (BWLD-Free Report), with an Earnings ESP of +1.85% and a Zacks Rank #2.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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YUM! BRANDS INC (YUM): Free Stock Analysis Report
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BUFFALO WLD WNG (BWLD): Free Stock Analysis Report
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