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4 Restaurant Stocks Set to Beat Estimates This Earnings Season

Zacks Equity Research

The impact of lower foot traffic and high costs are likely to show on the Restaurant industry’s fourth-quarter 2019 results. According to Black Box Intelligence (formerly TDn2K), restaurant industry’s same-store sales are likely to see a decline of 0.1%. The decrease can primarily be attributed to same-store traffic decline of 3.4%.

Moreover, high cost of operations has been plaguing the restaurant giants for a quite a while. Further, sales-building efforts such as promotional activities and convincing pricing strategy are detrimental to margins. Apart from this, competition, high wage and food cost inflation remained concerns. Moreover, most restaurateurs have been facing rising employee vacancies and are perpetually understaffed, a trend that is likely to reflect on overall performance.

Nonetheless, the restaurant operators are continuously trying to strategize and maintain competitive edge by catering to changing preferences and trends. Partnerships with delivery channels like DoorDash, Grubhub, Postmates and Uber Eats, digital innovation, rollout of self-service kiosks and loyalty programs are likely to have benefited the industry in the fourth quarter.

Considering the trend-driven nature of the industry, restaurateurs have been constantly innovating items for consumers while maintaining complete transparency about ingredients. Moreover, restaurant operators have been focusing on driverless delivery systems to drive sales. This is expected to bring down expenses substantially as it does away with delivery personnel.

Moreover, increase in consumer spending, steady rise in wages and lower unemployment are likely to have driven the industry in fourth-quarter 2019.

How to Pick the Right Stocks?

Amid a large number of restaurant stocks, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver better-than-expected earnings.

While there is no fool-proof method of picking outperformers, our proprietary methodology — the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — helps in identifying stocks that have high chances of delivering a positive surprise in their upcoming earnings announcement. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Here are some restaurant industry players, set to report fourth-quarter 2019 results, which investors can take a look at.

Chipotle Mexican Grill, Inc. CMG is slated to release quarterly numbers on Feb 4. The company currently has a Zacks Rank #2 and an Earnings ESP of +3.25%. The Zacks Consensus Estimate for its quarterly earnings is pegged at $2.75, suggesting growth of 59.9% from the prior-year quarter. The company beat estimates in the trailing four quarters by 16.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chipotle Mexican Grill, Inc. Price and EPS Surprise

BJ's Restaurants, Inc. BJRI currently has a Zacks Rank #3 and an Earnings ESP of +2.03%. The restaurant surpassed estimates in two of the trailing four quarters, the average positive earnings surprise being 22.9%. The Zacks Consensus Estimate for the company’s earnings in the quarter to be reported is pegged at 44 cents, indicating a decline of 10.2% from the year-ago reported figure.

BJ's Restaurants, Inc. Price and EPS Surprise

Denny's Corporation DENN is scheduled to release quarterly numbers on Feb 11. The company currently has a Zacks Rank #1 and an Earnings ESP of +5.00%. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 17 cents, suggesting a decline of 5.6% from the year-ago reported figure. The company beat estimates in the trailing four quarters by 19.5%, on average.

Denny's Corporation Price and EPS Surprise

Wingstop Inc. WING is scheduled to release quarterly numbers on Feb 19. The company currently has a Zacks Rank #3 and an Earnings ESP of +1.12%. The Zacks Consensus Estimate for earnings for the fourth quarter is pegged at 18 cents, indicating an improvement of 20% from the prior-year quarter. The company beat estimates in three of the trailing four quarters by 4%, on average.

Wingstop Inc. Price and EPS Surprise

 

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Click to get this free report Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report BJ's Restaurants, Inc. (BJRI) : Free Stock Analysis Report Wingstop Inc. (WING) : Free Stock Analysis Report Denny's Corporation (DENN) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research