Markets
ANF

Zoe's Kitchen (ZOES) to Post Q3 Earnings: What's in Store?

Zoe's Kitchen, Inc.ZOES is set to report third-quarter 2015 results on Nov 19, after the market closes. Last quarter, the company posted a positive earnings surprise of 25.00% bringing the average earnings surprise to 77.08% for the trailing four quarters.

Let's see how things are shaping up for this announcement.

Factors at Play

This fast casual Mediterranean cuisine restaurant posted better-than-expected results in three of the past four quarters while meeting the estimates once. Last quarter, the company posted positive comps for the 22nd time in a row backed by new menu items and the related marketing and promotional campaigns. Moreover, the company's expansion strategy is a key growth driver which should boost result in the to-be-reported quarter as well.

Further, Zoe's Kitchen's various cost reduction initiatives, including savings in food costs through waste reduction and efficiency initiatives in supply chain are likely to boost third-quarter earnings.

Nevertheless, challenges persist in the restaurant industry. Higher food costs due to worldwide agricultural supply, further compounded by a drought in California, demand-supply imbalance and other macroeconomic factors would keep profits under pressure. These factors are likely to have an impact on the third-quarter results. Also, higher labor and pre-opening costs would hurt profits.

Earnings Whispers

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 (Strong Buy), 2 (Buy) or 3 (Hold) 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 3 cents. Hence, the difference is 0.00%.

Zacks Rank : Zoe's Kitchen's Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

Note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Stocks to Consider

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

Bob Evans Farms, Inc. BOBE , with an Earnings ESP of +2.50% and a Zacks Rank #3.

Abercrombie & Fitch Co. ANF , with an Earnings ESP of +15.79% and a Zacks Rank #3.

Beacon Roofing Supply, Inc. BECN , with an Earnings ESP of +1.45% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ABERCROMBIE (ANF): Free Stock Analysis Report

BOB EVANS FARMS (BOBE): Free Stock Analysis Report

BEACON ROOFING (BECN): Free Stock Analysis Report

ZOES KITCHEN (ZOES): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

ANF BECN

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More