Restaurant Stocks to Watch for Earnings on Nov 2: RRGB, HABT

The Q3 earnings season is well under way with 291 of the S&P 500 members having already reported their quarterly numbers (as of Oct 28).

According to the latest Earnings Preview , total earnings for these 291 companies are up 2.2% from the year-ago quarter, courtesy of a 1.3% rise in revenues. Notably, 73.5% of the companies that have reported their quarterly numbers have surpassed earnings estimates while 57.4% have exceeded top-line expectations.

Turning our focus to the widely popular restaurant industry, we note that the performance of the restaurant stocks has been far from impressive so far.

Among the restaurant behemoths that have already reported their numbers, McDonald's Corporation MCD and Domino's Pizza Inc. DPZ posted robust results beating earnings and revenue estimates.

Though Yum! Brands, Inc.'s YUM earnings were in line with the Zacks Consensus Estimate, revenues failed to surpass the same. Dunkin' Brands Group DNKN and Buffalo Wild Wings Inc. BWLD also missed top-line expectations.

Two other key players, BJ's Restaurants, Inc. BJRI and Chipotle Mexican Grill, Inc. CMG , posted disappointing results wherein both earnings and sales missed estimates.

We thus note that a soft consumer spending environment in the U.S. restaurant space, which is leading to lower traffic and comps, is turning out to be a major headwind for the top line.

Two restaurateurs are set to report their quarterly numbers on Nov 2. Let's take a look at what might be in store for these companies:

Red Robin Gourmet Burgers Inc.RRGB recorded a negative earnings surprise of 5.06% last quarter. However, before that, the company surpassed earnings estimates in the three trailing quarters, bringing the average surprise in last four quarters to a positive 6.50%.

RED ROBIN GOURM Price and EPS Surprise


Notably, our proven model shows that an earnings beat is uncertain for Red Robin in third-quarter fiscal 2016. This is because, according to our quantitative model, a company needs the right combination of the two key ingredients - a Zacks Rank #3 (Hold) or better and a positive Earnings ESP - to increase its odds of an earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

For the quarter, the company has an earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell), making it difficult to conclusively predict a beat.

Notably, the Zacks Consensus Estimate for the quarter's earnings is pegged at 38 cents. Higher labor costs, expenses related to various sales building initiatives along with pre-opening and remodeling expenditures are expected to put pressure on fiscal third-quarter margins. However, the company's brand transformation initiatives, and the introduction of a strategic plan to drive sales and lower expenses could somewhat boost the results (read more: Red Robin Q3 Earnings: A Disappointment in Store? ).

The Habit Restaurants, Inc.HABT posted a 10.001% negative earnings surprise last quarter. Meanwhile, the trailing four-quarter average earnings surprise stands at a positive 8.75%.

HABIT RESTRNTS Price and EPS Surprise


For the third quarter, the Zacks Consensus Estimate is pegged at 6 cents per share. We note that Habit Restaurants is unlikely to post a beat in third-quarter 2016 due to the combination of Earnings ESP of 0.00% and its Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

The second quarter marked the company's 50th consecutive year-over-year growth in comps. We expect the trend to continue in Q3 given the company's high quality Limited Time Offers, targeted digital strategies and innovative media partnerships, together with great operational execution. However, higher costs might hamper the quarter's profitability while a challenging sales environment in the restaurant space could hurt revenues (read more: Habit Restaurants Q3 Earnings: What's in Store? ).

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

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YUM! BRANDS INC (YUM): Free Stock Analysis Report

CHIPOTLE MEXICN (CMG): Free Stock Analysis Report

DOMINOS PIZZA (DPZ): Free Stock Analysis Report

BUFFALO WLD WNG (BWLD): Free Stock Analysis Report

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

MCDONALDS CORP (MCD): Free Stock Analysis Report

RED ROBIN GOURM (RRGB): Free Stock Analysis Report

HABIT RESTRNTS (HABT): Free Stock Analysis Report

DUNKIN BRANDS (DNKN): 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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