Can BJ's Restaurants (BJRI) Surprise this Earnings Season? - Analyst Blog

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BJ's Restaurants, Inc. ( BJRI ) is set to report fourth-quarter and full year 2014 results on Feb 18, 2015 after the markets close. Last quarter, the company posted a positive earnings surprise of 76.92%. The company has beaten earnings estimates in three of the trailing four quarters and matched the estimates in one quarter. It has an average positive earnings surprise of 33.81%. Let's see what is in store this quarter.

Factors to Consider

With a unique position in the commoditized hyper-competitive bar and grill segment, BJ's Restaurants is well-poised to sustain its growth momentum due to improved operating efficiencies and innovative offerings. We are also encouraged by BJ's Restaurants' prudent expansion activities to drive comps. The company expects the trend to continue and anticipates margins and profitability to improve in the fourth quarter of 2014.

BJ's Restaurants expects revenues to increase 7.1% year over year to $213.9 million in the fourth quarter. Comps in the quarter are expected to increase 1.2% comparing favorably with the prior-quarter comps growth as well as the year-ago quarter comps decline.

Given the company's initiatives like a guest loyalty program, catering program and focus on supply chain management, we believe it would not be difficult for the company to achieve its target.

However, like all food chains, BJ's Restaurants is not immune to food costs. Profits are expected to remain under pressure due to food cost inflation as a result of domestic and worldwide agricultural supply and demand imbalance and other macroeconomic factors. In addition to rising commodity costs, labor costs, marketing and pre-opening costs are also expected to put margins under pressure as the company intends to open more restaurants, going forward.

Earnings Whispers

Our proven model does not conclusively show that BJ's Restaurants is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 21 cents.

Zacks Rank: BJ's Restaurants has a Zacks Rank #2 (Buy). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some other companies in the restaurant industry that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

DineEquity, Inc. ( DIN ), with an Earnings ESP of +6.14% and a Zacks Rank #2.

Kona Grill Inc. ( KONA ), with an Earnings ESP of +11.11% and a Zacks Rank #1 (Strong Buy).

Texas Roadhouse, Inc. ( TXRH ), with an Earnings ESP of +3.85% and a Zacks Rank #2.

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BJ'S RESTAURANT (BJRI): Free Stock Analysis Report

TEXAS ROADHOUSE (TXRH): Free Stock Analysis Report

DINEEQUITY INC (DIN): Free Stock Analysis Report

KONA GRILL INC (KONA): Free Stock Analysis Report

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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.

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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