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BJ's Restaurants (BJRI) Down 7.3% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
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A month has gone by since the last earnings report for BJ's Restaurants (BJRI). Shares have lost about 7.3% 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’ Earnings & Revenues Beat Estimates in Q1

BJ’s Restaurants reported better-than-expected results for the first quarter of 2019. With this, the company’s top line surpassed estimates for six straight quarters while the bottom line exceeded it in five of the trailing six quarters.

Adjusted earnings of 62 cents surpassed the Zacks Consensus Estimate for earnings of 51 cents by 21.6%. The bottom line, however, decreased 11.4% year over year.

Revenues & Comps

Total quarterly revenues were $290.6 million, which surpassed the consensus estimate of $289.1 million by 0.5%. The top line also grew 4.3% year over year, driven by increased guest traffic and comps.

Comparable restaurant sales in the quarter under review increased 4.2%. The uptick was driven by a 0.7% increase in guest traffic and rise in average check. Notably, comps growth was slightly lower than 4.5% increase recorded in the fourth quarter of 2018 and compared favorably with 2% 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, increased 10 basis points (bps) to 36.2% in the first quarter while occupancy and operating costs (as a percentage of sales) were 21%, up 40 bps year over year.

Restaurant-level operating margin was 17.4%, down 80 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 Apr 2, 2019, cash and cash equivalents totaled $25.7 million compared with $29.2 million as of Jan 2, 2019.

Total debt increased to $102 million at the end of the first quarter from $95 million at 2018 end.

BJ's Restaurants declared a quarterly cash dividend of 12 cents, payable on May 27, 2019, to shareholders of record at the close of business on May 13, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, BJ's Restaurants has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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. Notably, BJ's Restaurants has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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