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BJ's Restaurants (BJRI) Down 12.6% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
Franklin Resources (BEN) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

It has been about a month since the last earnings report for BJ's Restaurants (BJRI). Shares have lost about 12.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.

BJ’s Restaurants Q4 Earnings Miss, Revenue Beat

BJ’s Restaurantsreported mixed results for the fourth quarter of 2018, wherein earnings missed estimates while revenues surpassed the same. With this, the top line exceeded the consensus mark for five straight quarters while the bottom line missed after outpacing estimates for five consecutive quarters.

Adjusted earnings of 49 cents missed the Zacks Consensus Estimate of 50 cents by 2%. The bottom line, however, increased 32.4% year over year on the back of improved comps and restaurant operating margins.

Revenues & Comps

Total quarterly revenues were $280.5 million, which surpassed the consensus estimate of $278 million by nearly 1%. The top line also grew 7.4% year over year, driven by increased guest traffic and comps.

Comparable restaurant sales in the quarter under review increased 4.5%. The uptick was driven by a 1.1% increase in guest traffic and rise in average check. Notably, comps growth was slightly lower than 6.9% increase in the third quarter of 2018 and compared favorably with 1.6% increase in the year-ago quarter. The company stated that robust sales-building efforts and marketing efficiency will continue to drive comps in the quarters to come.

Expenses & Operating Margins

Labor costs, as a percentage of sales, decreased 40 basis points (bps) to 35.4% in the fourth quarter while occupancy and operating costs were 22%, up 60 bps year over year.

Restaurant-level operating margin was 17.2%, up 50 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 Jan 1, 2019, cash and cash equivalents totaled $29.2 million compared with $24.3 million as of Jan 2, 2018.

Total debt increased to $95 million at the end of 2018 from $63.5 million at 2017 end.

BJ's Restaurants declared a quarterly cash dividend of 12 cents, payable on Mar 26, 2019, to shareholders of record at the close of business on Mar 12, 2019.

2018 Highlights

Adjusted earnings increased 14.5% to $2.35. Total revenues grew 8.3% to $1.1 billion in 2018. Comps also increased 5.3% in the year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -33.33% due to these changes.

VGM Scores

At this time, BJ's Restaurants has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise BJ's Restaurants has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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