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What's in Store for Cosi Inc. (COSI) this Earnings Season?

Zacks Equity Research

Cosi Inc. COSI is scheduled to report second-quarter 2016 financial numbers on Aug 11, after market close.

Last quarter, Cosi’s loss was wider than the Zacks Consensus Estimate, which led to a negative earnings surprise of 33.33%. Moreover, this restaurant chain’s trailing four-quarter average surprise stands at a negative 35.87%.

Let’s see how things are shaping up ahead of this announcement.

COSI INC Price and EPS Surprise

COSI INC Price and EPS Surprise | COSI INC Quote

Factors Likely to Influence this Quarter

The company has not been able to attain profits during its entire operating history. We do not expect any turnaround in Q2 as well. Moreover, higher food and beverage as well as labor costs coupled with other restaurant expenses may dent the company’s profits in the to-be-reported quarter.

However, continued focus on unit-level execution, simplification of menu, guest satisfaction along with digital advertising should drive traffic and comps in the second quarter. Also, various cost savings initiatives undertaken by the company should somewhat help drive margins

Earnings Whispers

Our proven model does not conclusively show that Cosi is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Cosi has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 7 cents per share.

Zacks Rank: Cosi has a Zacks Rank #4 (Sell). Please note that 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 to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

The Children's Place, Inc. PLCE has an earnings ESP of +25.00% and a Zacks Rank #2.

Lowe's Companies, Inc. LOW has an earnings ESP of +2.84% and a Zacks Rank #2.

Macy's, Inc. M has an earnings ESP of +25.00% and a Zacks Rank #3.

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