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Factors Setting the Tone for Red Robin’s (RRGB) Q1 Earnings


Red Robin Gourmet Burgers, Inc. RRGB is scheduled to report first-quarter 2018 results on May 22, after market close.

In the fourth quarter of 2017, the company’s earnings surpassed the Zacks Consensus Estimate by 41.8%. Also, the same outpaced the consensus mark by an average of 23.2% in three of the trailing four quarters.

Q1 Expectations

The question lingering in investors’ minds now is whether Red Robin will be able to deliver a positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for first-quarter earnings is pegged at 74 cents, lower than 89 cents in the year-ago quarter. Of late, the company’s earnings estimates have been stable. In the fourth quarter of 2017, it witnessed earnings growth of 122.9% on a year-over-year basis.

Meanwhile, analysts polled by Zacks expect revenues of nearly $430.6 million, up 2.9% from the prior-year quarter.

Let’s delve deeper to find out how the company’s top and bottom line will shape up this earnings season.

Factors at Play

In the first quarter, Red Robin’s revenues are likely to be driven by robust sales building initiatives. To drive sales, the company has improved its seating efficiency and lowered guests’ waiting times. Moreover, Red Robin’s remodeling initiatives are expected to boost its potential as a brand and improve guest experience, which in turn, should drive revenues. Among the brand revitalization initiatives, the company is focused on menu innovation, operational improvement and making a better customer service platform. Also, it continues to launch a variety of salads, appetizers, innovative desserts and adult beverages as well as kids’ menu.

Apart from focusing on unit expansion to boost traffic, Red Robin is expanding its off-premise online-ordering business via carry-out, delivery and catering. In fact, the increasing demand for off-premise orders is already reflecting in its business as they ring in at a higher total check. In the fourth quarter of 2017, the company delivered 8.3% mix in off-premise, up 45% year over year.

However, Red Robin’s earnings are expected to decline sharply from the prior-year quarter tally. This reflects the loss of one high volume revenue week as compared with a year ago. In addition, rising costs might hurt the company’s margin in the quarter to be reported. Meanwhile, Red Robin is investing heavily in several sales building initiatives like advertising and technical upgrades, which should result in elevated costs. Remodeling and restaurant maintenance also add to the already rising expenses.

Red Robin Gourmet Burgers, Inc. Price, Consensus and EPS Surprise

What Does the Zacks Model Unveil?

Our proven model does not show that Red Robin is likely to beat earnings estimates 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Red Robin has an Earnings ESP of 0.00%. Although, the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

Darden DRI reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of higher revenues.

Restaurant Brands’ QSR first-quarter 2018 earnings and revenues outpaced the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, improving 86.1% year over year.

Chipotle’s CMG first-quarter 2018 earnings surpassed analysts’ expectations while revenues were in line with the same. Adjusted earnings of $2.13 per share surged 33.1% from the year-ago quarter, courtesy of higher revenues and lower food costs.

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