BJ's Restaurants (BJRI) Up 7.2% Since Earnings Report: Can it Continue?

A month has gone by since the last earnings report for BJ's Restaurants, Inc. BJRI. Shares have added about 7.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is BJRI due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

BJ's Restaurants Beats Q1 Earnings & Revenue Estimates

BJ’s Restaurants reported better-than-expected earnings and revenues in first-quarter 2018. Adjusted earnings of 67 cents per share surpassed the Zacks Consensus Estimate of 54 cents by 24.1%. The bottom line surged 59.5% year over year on the back of improved comps and restaurant operating margins. Quarterly revenues of $278.5 million topped the consensus estimate of $274.5 million by 1.5%. Revenues also grew 8% year over year, driven by growth in traffic and comps.

The company’s diverse sales-driving efforts bolstered top-line performance. BJ Restaurants’ high-quality slow-roasted menu has been favoring growth in foot traffic, while daily Brewhouse Specials have contributed directly to the company’s top line.

Comps, Expenses & Operating Margins

Comps in the first quarter grew 4.2%, comparing favorably with 1.6% increase in the fourth quarter of 2017 and year-ago quarter’s decline of 1.3%. Comps grew on strong traffic gains of 0.4% in the quarter.

Labor costs, as a percentage of sales, increased 30 basis points (bps) in the reported quarter to 36.1%, whereas operating costs were 20.6% of net sales, down 30 bps year over year.

Restaurant-level operating margin was 18.2%, up 30 bps from the year-ago quarter’s tally. In order to counter high costs prevalent in the industry, the company is undertaking various cost- savings and efficiency initiatives to drive margins.

Balance Sheet

As of Apr 3, 2018, cash and cash equivalents totaled $28.7 million, compared with $24.3 million as of Jan 2, 2018.

Total debt declined to $158.5 million at the end of first-quarter 2018, from $163.5 million at the end of fourth-quarter 2017.

During the first quarter, the company repurchased approximately 0.1 million shares of its common stock at approximately $5.6 million. Additionally, the company declared a cash dividend of 11 cents per share of common stock payable on Mar 28, 2018, to shareholders of record at the close of business on Mar 14, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to three lower.

BJ's Restaurants, Inc. Price and Consensus

 

BJ's Restaurants, Inc. Price and Consensus | BJ's Restaurants, Inc. Quote

VGM Scores

At this time, BJRI has a nice Growth Score of B, a grade with the same score on the momentum front. The stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Based on our scores, the stock is equally suitable for growth and momentum investors while value investors may want to look elsewhere.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, BJRI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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