BJ's Restaurants Up 143% in 6 Months: What's Behind the Rally?

Despite the coronavirus pandemic, the restaurant industry has gained 33.8% in the past six months, compared with the S&P 500 rally of 25.4%. BJ's Restaurants, Inc. BJRI, which belongs to the same industry, has soared 142.6% in the same time frame. We believe there is still momentum left in this Zacks Rank #1 (Strong Buy) stock. This is because the company has an expected long-term earnings growth rate of 15%.

Let’s delve deeper into other factors that have kept BJ's Restaurants ahead of its peers.

Robust Off-premise Sales

Even though the company has reopened majority of its dining rooms with limited capacity, its off-premise operations continue to drive overall sales. To this end, the company added Slow-Roasted Ribs, Parmesan Chicken, Atlantic Salmon and Rib-Eye Steaks to its off-premise menu at attractive prices. It is also working on new SMS text and email technology to enhance customer convenience in terms of pickup and delivery. Overall, off-premise sales have more than doubled compared to pre-COVID-19 levels, while dining rooms have recorded half of normal sales levels through June-end.


Digital Initiatives Bode Well

BJ’s Restaurants is investing heavily in technology-driven initiatives, like digital ordering, to boost sales. The company’s app and digital platforms are allowing it to more effectively and efficiently offer promotions. In second-quarter 2019, BJ’s Restaurants completed the rollout of third-party delivery provisions in all its restaurants. Apart from partnerships, the company has rolled out several digital initiatives including digital check-ins, digital menus and digital payment options to attract more customers.

Additionally, the company’s loyalty guest database continues to grow courtesy of steady increase in transactions. The company, which completed the national launch of its loyalty program in first-quarter 2018, is also witnessing increase in loyalty sign up and reward redemptions.

Enough Liquidity to Tide Over Coronavirus Crisis

BJ's Restaurants has enough liquidity to survive the coronavirus pandemic for some time. As of Jun 30, 2020, the company has approximately $86.7 million of cash on its balance sheet and another $50 million under its line of credit. Although the company is experiencing cash burn of $0.5-$1 million per week, it stated that it has sufficient liquidity to maintain operations at the current scenario for some time. As of Jun 30, the company’s total debt stands at $166.8 million compared with $143 million at the end of Dec 31, 2019. At the end of second-quarter 2020, the company had a debt-to-capital ratio of 0.67, which indicates that its debt levels are manageable.

Other Key Picks

Some other top-ranked stocks, which are worth considering, include Brinker International, Inc. EAT, Chuy's Holdings, Inc. CHUY and Jack in the Box Inc. JACK, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Brinker International has a three-five year earnings per share growth rate of 12.7%.

Chuy's Holdings has a trailing four-quarter earnings surprise of 87.3%, on average.

Jack in the Box 2021 earnings are expected to surge 16.1%.

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

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