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Restaurant Stocks' Q4 Earnings on Feb 7: BWLD, PNRA & YUMC

After posting five back-to-back declines, the third quarter of 2016 was the first to move into positive earnings growth territory. The fourth quarter of 2016 is all set to keep the momentum alive and take the growth trajectory forward.

In fact, per the latest Earnings Preview report, fourth-quarter 2016's growth is on track to be the highest in the last two years, while total earnings for the quarter are set to break all records.

As of Feb 3, 275 of the S&P 500 members have already reported their results. Total earnings for these 275 index members were up 6.9% from the year-ago quarter on a 4.2% improvement in revenues. The beat ratio was 68% and 54.5% for earnings and revenues, respectively.

Restaurant Stocks in Focus

Turning our focus on the restaurant companies from the Retail-Wholesale sector, we note that their performance has been mixed so far this earnings season.

Among the large restaurant stocks that have reported, McDonald's Corporation MCD has beaten both the top- and bottom-line expectations. Meanwhile, Chipotle Mexican Grill, Inc. CMG and Starbucks Corporation SBUX topped and met earnings, respectively, while missing the revenue estimates. On the other hand, Brinker International, Inc. EAT lagged on both fronts.

Three restaurant companies are set to report their fourth-quarter 2016 results on Feb 6. Will these companies manage to put up a decent performance? Let's take a look at what might be in store for them this quarter:

Buffalo Wild Wings Inc.BWLD posted in-line earnings last quarter. However, before that, the company lagged earnings estimates in two of the three trailing quarters, bringing the average surprise in last four quarters to a negative 2.78%.

Notably, our proven model shows that an earnings beat is uncertain for Buffalo Wild Wings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

For the quarter, the company has an Earnings ESP of -3.25% and a Zacks Rank #3, making it difficult to conclusively predict a beat. Notably, the Zacks Consensus Estimate for the quarter's earnings is pegged at $1.23. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

We believe that the menu price increases made by the company along with a soft consumer spending environment in the U.S. restaurant space might continue to affect traffic trends, thereby putting the quarter's comps under pressure. Nonetheless, Buffalo Wild Wings' efforts to revive comps growth via various digital initiatives, the remodeling of existing locations, promotional offerings, focus on delivery services, better food presentation and operational efficiency should somewhat boost quarterly results. (read more: Buffalo Wild Wings Q4 Earnings: What's in the Cards? ).

Buffalo Wild Wings, Inc. Price and EPS Surprise

Buffalo Wild Wings, Inc. Price and EPS Surprise | Buffalo Wild Wings, Inc. Quote

Panera Bread CompanyPNRA delivered a 2.24% positive earnings surprise last quarter. In fact, the company's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 3.39%.

We note that Panera is unlikely to post a beat in fourth-quarter 2016 due to the combination of its Earnings ESP of -0.50% and Zacks Rank #3. The Zacks Consensus Estimate for the quarter's earnings is pegged at $2.00. You can see the complete list of today's Zacks #1 Rank stocks here .

The company's Panera 2.0 program, menu innovation, promotional strategies and new store design have been driving sales. Furthermore, the company's digitally enabled larger party-sized channels such as delivery, catering, Rapid Pick-Up, along with its Panera At Home business should turn out to be strong revenue growth drivers in the quarter. However, high costs related to the initiatives might impact profitability while a muted consumer spending environment in the U.S. restaurant industry might hurt comps (read more: Panera Q4 Earnings: What's in Store this Season? ).

Panera Bread Company Price and EPS Surprise

Panera Bread Company Price and EPS Surprise | Panera Bread Company Quote

YUM! China Holdings Inc.YUMC is set to release its first ever quarterly result as an independent company, post its spin-off from YUM! Brands Inc. YUM in Oct 2016.

We note that YUM! China is unlikely to post a beat this quarter due to the combination of its Earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell).

Notably, the Zacks Consensus Estimate for the quarter's earnings is pegged at 12 cents.

Yum China Holdings Inc. Price and Consensus

Yum China Holdings Inc. Price and Consensus | Yum China Holdings Inc. Quote

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

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Panera Bread Company (PNRA): Free Stock Analysis Report

Yum! Brands, Inc. (YUM): Free Stock Analysis Report

Chipotle Mexican Grill, Inc. (CMG): 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

Brinker International, Inc. (EAT): Free Stock Analysis Report

Yum China Holdings Inc. (YUMC): 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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