Thanks to savings from lower gas prices, consumers have started spending more on dining out. Rising consumer spending bodes well for the restaurant industry and makes this Zacks rank #1 (Strong Buy) restaurant stock quite appetizing.
About the Company
Founded in 1978 and headquartered in Orange County, CA, BJ’s Restaurants (BJRI – Analyst Report)owns and operates a chain of 147 high-end casual dining restaurants in 17 states. Their signature menu items include deep dish pizza and craft beer. They call their positioning “contemporary, high-quality, casual plus”.
Excellent Quarterly Results
The company reported adjusted earnings of $0.31 per share for Q4, beating the Zacks Consensus Estimate of $0.21 by 48%. Earnings were also up significantly year-over-year. The improvement was thanks mainly to improved revenues and margins.
Revenues of $213.9 million were up 7.1% year over year, resulting from an improvement in comps to 1.2%, compared to the prior quarter comps growth of only 0.3% and the year-ago quarter comps decline of 2.7%. Restaurant level margins were 18.4%, up 330 basis points year-over-year.
The company opened three restaurants during the quarter and plans to open at least 15 restaurants in 2015.
A number of steps taken recently such as introduction of a new menu in February 2014, simplifying kitchen processes under project Q and cost control initiatives appear to be delivering results.
Positive Earnings Estimate Revisions
As a result of strong quarterly report, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year now stand at $1.31 per share and $1.64 per share respectively, up from $1.19 per share and $1.50 per share, 60 days ago.
Rising estimates sent the stock back to a Zacks Rank#1 (Strong Buy) last month. The company has beaten Zacks Consensus Estimate in each of last four quarters, with an average quarterly surprise of 46%.
The Bottom Line
With healing labor market and declining oil prices, consumers are now much more willing to spend on high-quality casual dining. Thanks to favorable industry trends, a diversified business model and several steps taken recently to improve its processes, the company is moving in the right direction.
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