Zoe's Kitchen, Inc.ZOES is set to report first-quarter 2016 results on May 31, after the market closes . Last quarter, it posted a positive earnings surprise of 50%, bringing the trailing four-quarter average to 97.92%. Let's see how things are shaping up for this announcement.
ZOES KITCHEN Price and EPS Surprise
Factors to Consider
Zoe's Kitchen began trading in Apr 2014. This fast casual restaurant specializing in Mediterranean cuisine has posted better-than-expected revenues and earnings in all the four quarters reported so far.
Comps improved in all the previous quarters backed by improved traffic and an increase in product mix. We expect the trend to continue in the to-be-reported quarter as well, given the company's efforts to develop new menu items and marketing and promotional campaigns to promote these items.
Further, Zoe's Kitchen's various cost savings initiatives, including savings in food costs through waste reduction, efficiency initiatives in supply chain and lowering labor costs, are likely to boost first-quarter earnings.
However, challenges persist in the restaurant industry. Like other food chains, increasing labor costs remain a concern for Zoe's Kitchen too. These factors are likely to have an impact on the first quarter results.
Our proven model does not conclusively show that Zoe's Kitchen is likely to beat earnings this quarter. This 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 4 cents. Hence, the difference is 0.00%.
Zacks Rank: Zoe's Kitchen's Zacks Rank #3 (Hold) increases the predictive power of the ESP. However, we need a positive ESP to be confident of an earnings surprise.
Note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Stocks to Consider
Some stocks in the broader retail sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Darden Restaurants, Inc. DRI , with an Earnings ESP of +0.93% and a Zacks Rank #3.
The Habit Restaurants, Inc. HABT , with an Earnings ESP of +10.00% and a Zacks Rank #3.
Good Times Restaurants Inc. GTIM , with an Earnings ESP of +50.00% and a Zacks Rank #3.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.