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Wingstop (WING) to Report Q4 Earnings: What's in the Cards?

Wingstop, Inc.WING is set to report fourth-quarter 2017 results on Feb 22, after the closing bell. Markedly, this will be the company's 11th quarterly result since its IPO in June 2015.

Last quarter, the company's earnings surpassed the Zacks Consensus Estimate by 13.33%. In fact, Wingstop has surpassed the Zacks Consensus Estimate in each of the last 10 quarters.

Let's see how things are shaping up prior to the upcoming quarterly release.

Fairly Upbeat Sales Expectation

A choppy sales environment in the overall restaurant space might continue to limit revenue growth. Nevertheless, we expect the company's relentless focus on menu innovation to drive comps in the to-be-reported quarter. Moreover, the company's new POS system integrates online orders straight to the kitchen that is expected to bolster online ordering growth and lead to higher average check.

Early last month, the company released initial unaudited sales figures for fourth quarter and fiscal 2017, ending on Dec 30, 2017. During the fourth quarter, system-wide restaurant count was up 13.5% year over year to 1,133 worldwide locations. Net openings were 45 in the quarter.

Domestic comps improved 5.2%, while the company recorded company-owned restaurant comps growth of 4.6%. System-wide sales were up 15.6% to approximately $285 million in the quarter on a year-over-year basis.

Meanwhile, the Zacks Consensus Estimate for the systemwide domestic comps growth in the quarter is pegged at 4.95%, higher than the prior-quarter's reported growth of 4.1%. On the other hand, the consensus estimate for the company-owned domestic comps growth in the quarter is pegged at 4.03%, lower than the prior-quarter's reported growth of 5.5%.

In order to boost traffic and sales, the company is relying on continual expansion. Recently, Wingstop opened its 100th location in Reynosa, Mexico, increasing its international restaurant count. The company also signed two international development agreements for 110 restaurants across Australia and New Zealand over the next 10 years and more than 70 restaurants in France for the next 12 years.

Solid unit development, increased investments in technology to boost online ordering along with migration to a national advertising platform are likely to drive the quarter's results. In fact, Wingstop continues to grow its online ordering mix and expects to sustain TV and digital presence to continue building on the momentum established in the first three quarters.

Higher Commodity Rates for Bone-In Chicken Wings a Woe

The first and second quarters of 2017 witnessed 11% year-over-year increase in commodity rates for bone-in chicken wings. In the third quarter as well, commodity rates for bone-in chicken wings grew 41%. Wingstop expects year-over-year inflation on bone-in chicken wings to continue in the fourth quarter as well, which is likely to weigh on margins. On third-quarter earnings call, the company had highlighted the fact that for the fourth quarter, bone-in chicken wing prices will remain elevated compared with the year-ago period. Given the situation, Wingstop had expected inflation of approximately 20% in bone-in wings for fiscal year 2017.

Considering these factors, the Zacks Consensus Estimate for the quarter's sales is pegged at $27.4 million, reflecting an increase of 10.7% year over year. This solid revenue growth is anticipated to boost earnings as the consensus estimate for the bottom line is pegged at 16 cents per share, implying a year-over-year improvement of 6.7%.

Wingstop Inc. Price and EPS Surprise

Wingstop Inc. Price and EPS Surprise | Wingstop Inc. Quote

What the Zacks Model Unveils

Our proven model shows that Wingstop is likely to beat estimates this quarter as the stock has the right combination of two key ingredients - a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen.

Zacks ESP: Wingstop has an Earnings ESP of +0.27%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Wingstop has a Zacks Rank #3.

As it is, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are a few other stocks from the restaurant space that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Domino's DPZ has an Earnings ESP of +0.37% and a Zacks Rank #2. The company is slated to report quarterly numbers on Feb 20. You can see the complete list of today's Zacks #1 Rank stocks here .

Cheesecake Factory CAKE has an Earnings ESP of +0.82% and a Zacks Rank #3. The company is slated to report quarterly results on Feb 21.

Zoe's Kitchen ZOES has an Earnings ESP of +13.16% and a Zacks Rank #3. The company is slated to report quarterly numbers on Feb 22.

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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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