Cost Savings to Aid BJ's Restaurants' (BJRI) Q1 Earnings

Shutterstock photo

BJ's Restaurants, Inc. BJRI is scheduled to report first-quarter 2018 results on Apr 26, after market close.

The company has been undertaking various sales building initiatives that are expected to have reflected in the to-be-reported quarter's top line. Additionally, vigorous cost-containment initiatives are expected to have aided earnings in the first quarter. Despite bearing the brunt of soft consumer demand and pressurized sales in the past few quarters, the company's efforts to serve distinguished menu to customers and enhancement of digital capabilities have marked a turnaround.

Also, in a year's time, BJ Restaurants' shares have rallied 14.1% outperforming the industry 's gain of 6.7%.

Let's take a look at how the company's revenues and earnings will shape up in the to-be-reported quarter.

Several Initiatives to Aid Top Line

BJ's Restaurants has implemented several major sales building initiatives in 2017 that have been tested and are expected to have contributed positively in the first quarter. In 2017, the restaurant crew mastered advanced cooking methods and also became skillful in taking orders from the recently installed hand-held ordering tablets. Also, the company's slow-roasted menu launch has become a huge success.

Notably, off-premise sales increased to 7% of the company's revenues in the last reported quarter compared with its industry average of nearly 10-11%. Given the fact that off-premise sales represent a considerable revenue growth opportunity, the company has been undertaking various efforts to enhance delivery and take-out services. In fact, it intends to leverage its highly-rated mobile app and website, along with new third-party delivery partners to drive growth in off-premise sales. The company currently has delivery available in about 149 restaurants, with another 23 scheduled to be added by the end of the first quarter.

Also, BJ's has also developed a deep pipeline of new menu items, focusing on its EnLIGHTened menu category, featuring its new super food options. Moreover, the company expects to offset some of the labor pressure through prudent menu pricing and design. Additionally, its promotional offers along with bundled lunch offerings should boost sales and drive guest traffic. Additionally, the restaurant has undertaken several digital initiatives to improve the speed of service, and thereby enhance guest experience and profitability.

Owing to these sales building efforts, the Zacks Consensus Estimate for first-quarter revenues is pegged at $274.03 million, reflecting 6.3% year-over-year growth.

Cost-Cutting Efforts to Drive Earnings

Although high costs are prevalent in the restaurant space, various cost savings and efficiency initiatives of the company are expected to have aided margins and thereby earnings in the first quarter. The consensus estimate for the quarter's earnings is pegged at 54 cents per share, suggesting 28.6% growth from the prior-year quarter.

The company is committed to improve its operating margins through cost-containment initiatives. Notably, BJ's Restaurants is focusing more on its smaller prototype restaurants that cost roughly $1 million less than the prior prototype. This helps in reducing operating costs. Due to lesser food wastage and improved labor productivity, these new restaurants generate higher margins. Moreover, in 2017, the company initiated an additional $5 million of efficiency savings in areas such as sourcing, distribution, supplies and maintenance.

Also, gauging the high cost infested restaurant operating environment, it has decided to put off new openings for some time, and focus even more on its enterprise resources and build sales instead. This may turn out to be favorable as it would provide some margin momentum.

Our Quantitative Model Does Not Predict a Beat

BJ's Restaurants does not have the right combination of two main ingredients - a positive  Earnings ESP  and a Zacks Rank #3 (Hold) or higher - for increasing the odds of an earnings beat.

Zacks ESP:  The company has an Earnings ESP of -3.11%. You can uncover the best stocks to buy or sell before they're reported with our  Earnings ESP Filter .

Zacks Rank:  BJ's Restaurants has a Zacks Rank #3.

As it is, 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.

BJ's Restaurants, Inc. Price and EPS Surprise

BJ's Restaurants, Inc. Price and EPS Surprise | BJ's Restaurants, Inc. Quote

Stocks to Consider

Here are some companies in the restaurant space, which per our model have the right combination of elements to post an earnings beat this quarter.

Domino's DPZ has an Earnings ESP of +0.20% and holds a Zacks Rank #3. The company is scheduled to report first-quarter results on Apr 26, before market open. You can see  the complete list of today's Zacks #1 (Strong Buy) Rank stocks here .

Wingstop WING carries a Zacks Rank #3 and has an Earnings ESP of +3.80%. Wingstop is slated to release first-quarter results on May 3, after market close.

Wendy's WEN has an Earnings ESP of +2.72% and holds a Zacks Rank #3. The company is scheduled to report first-quarter results on May 8, after market close.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Domino's Pizza Inc (DPZ): Free Stock Analysis Report

BJ's Restaurants, Inc. (BJRI): Free Stock Analysis Report

The Wendy's Company (WEN): Free Stock Analysis Report

Wingstop Inc. (WING): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DPZ , BJRI , WEN , WING

More from Zacks.com




Equity Research

Research Brokers before you trade

Want to trade FX?