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Restaurant Stock Q1 Earnings on May 2: PZZA, DIN, DENN, BOJA

Zacks Equity Research
Updated

The Q1 earnings season is well underway with 288 of the S&P 500 members having already reported their quarterly numbers (as of Apr 28).

Per the latest Earnings Preview, total earnings for these 288 companies are up a solid 13.7% from the year-ago quarter, courtesy of 8.2% rise in revenues. While 76.4% of the companies that have reported their quarterly numbers surpassed earnings estimates, 68.1% exceeded top-line expectations.

Turning our focus to the widely popular restaurant industry, we note that the performance of the players here has been mixed so far this earnings season.

Among the restaurant stocks that have reported, McDonald’s Corporation MCD, Chipotle Mexican Grill, Inc. CMG and Domino’s Pizza Inc. DPZ posted robust results beating earnings and revenue estimates.
 
Meanwhile, Starbucks Corporation SBUX posted soft second-quarter fiscal 2017 financial results. While earnings came in line with the Zacks Consensus Estimate, revenues fell short of the same. In fact, Buffalo Wild Wings Inc. BWLD lagged on both fronts.

We thus note that a soft consumer spending environment in the U.S. restaurant space along with rising costs are continuing to haunt restaurant chains. Nonetheless, innovative operators with strong fundamentals are continuing to exhibit strength even in a not-so-favorable environment.

Four restaurant companies are set to report their first-quarter 2017 results on May 2. Will these companies manage to put up a decent performance? Let’s take a look at what might be in store for these companies:

Papa John’s International, Inc. PZZA posted a 4.55% positive earnings surprise in the previous quarter. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 10.26%.

Papa John's International, Inc. Price and EPS Surprise

 

Papa John's International, Inc. Price and EPS Surprise | Papa John's International, Inc. Quote

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Notably, our proven model does not conclusively show earnings beat for Papa John’s this quarter. This is because, according to our quantitative model, a company needs the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase its odds of an earnings surprise.

For the quarter, the company has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for the quarter’s bottom line is pegged at 75 cents. We expect the trend of delivering positive comps in both domestic and international markets to continue in the to-be-reported quarter, based on sales building initiatives such as menu innovation and provision of value offers. However, rising costs and negative currency translation might dent the quarter’s profits (read more: Papa John's Q1 Earnings: Can the Stock Surprise?).

CA-based restaurant operator DineEquity, Inc. DIN posted in-line earnings in the last reported quarter. However, the company’s trailing four-quarter average earnings surprise is a negative 0.23%.

DineEquity, Inc Price and EPS Surprise

 

DineEquity, Inc Price and EPS Surprise | DineEquity, Inc Quote

We note that DineEquity is unlikely to post a beat in the quarter due to the combination of its Zacks Rank #4 (Sell) and Earnings ESP of 0.00%. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.20.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

We expect DineEquity’s focus on brand innovation as well as its menu improvement strategy and breakfast inspired food offered throughout the day to bring back the trend of positive comps in the first quarter at the IHOP Brand. However, incremental investments in marketing programs and promotional activity to combat competition are expected to weigh on margins (read more: What to Expect from DineEquity Stock in Q1 Earnings?).

Denny's Corporation DENN recorded a positive earnings surprise of 30.77% in the last quarter. In fact, the company’s earnings surpassed/met the Zacks Consensus Estimate in the past four quarters, with an average beat of 9.97%.

Denny's Corporation Price and EPS Surprise

 

Denny's Corporation Price and EPS Surprise | Denny's Corporation Quote

For the quarter, the company has an Earnings ESP of 0.00%, which makes surprise prediction difficult even though the company has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for the quarter’s bottom line is pegged at 13 cents.

Bojangles', Inc. BOJA registered a 33.33% positive earnings surprise in the previous quarter. In fact, the company outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 21.61%.

Bojangles', Inc. Price and EPS Surprise

 

Bojangles', Inc. Price and EPS Surprise | Bojangles', Inc. Quote

For the quarter, the company has an Earnings ESP of 0.00% and a Zacks Rank #4, thereby making it difficult to conclusively predict an earnings beat. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 17 cents.

Stay tuned! Check back on our full write-up on earnings releases of these stocks.

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Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report
 
Domino's Pizza Inc (DPZ): Free Stock Analysis Report
 
Buffalo Wild Wings, Inc. (BWLD): Free Stock Analysis Report
 
Starbucks Corporation (SBUX): Free Stock Analysis Report
 
McDonald's Corporation (MCD): Free Stock Analysis Report
 
Denny's Corporation (DENN): Free Stock Analysis Report
 
Papa John's International, Inc. (PZZA): Free Stock Analysis Report
 
DineEquity, Inc (DIN): Free Stock Analysis Report
 
Bojangles', Inc. (BOJA): Free Stock Analysis Report
 
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Zacks Investment Research