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BJ’s Restaurants (BJRI) Q3 Earnings: Stock to Disappoint?


BJ's Restaurants, Inc. BJRI is set to report third-quarter 2016 results on Oct 19, after the market closes.

Last quarter, the company delivered a negative earnings surprise of 1.75%. Before that, the company delivered positive surprises in the three trailing quarters, bringing the average surprise in last four quarters to a positive 12.96%.

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

Factors to Consider

The company’s Project Q initiative, which reduced average kitchen hours leading to labor efficiencies, have led to strong margins in the past few quarters and are expected to continue doing so. Further, the company is also committed to raise its operating margins through cost containment initiatives.

Moreover, menu innovation, prudent expansion initiatives, and aggressive marketing and operational strategies have remained strong points for the company in the past and should drive sales in the third quarter as well. Also, the company’s investments in technology-driven initiatives like digital ordering should add to sales.

However, higher cost of sales and labor costs due to higher wages are expected to keep profits under pressure. To add to the woes, the company has been trading at its lowest in the past year, reflecting low investor confidence ahead of its earnings release.

Moreover, a downward trend in the overall restaurant industry space might hurt traffic and comps in the to-be reported quarter.

BJ'S RESTAURANT Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that BJ's Restaurants is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #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: Earnings ESP for BJ's Restaurants is -3.13% as the Most Accurate Estimate stands at 31 cents while the Zacks Consensus Estimate stands at 32 cents.

Zacks Rank: BJ's Restaurants carries a Zacks Rank #3, which when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some restaurant companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

The Cheesecake Factory Incorporated CAKE with an Earnings ESP of +1.64% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fogo de Chao, Inc. FOGO with an Earnings ESP of +13.33% and a Zacks Rank #3.

The Wendy’s Company WEN with an Earnings ESP of +10% and a Zacks Rank #3.

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