The Habit Restaurants, Inc. HABT is set to report second-quarter 2015 financial numbers — the third quarterly result following the Nov 2014 IPO — on Aug 5, after the market closes. Last quarter, the company posted a positive earnings surprise of 50.0%.
Let’s see what is in store this quarter.
Factors to Consider
Habit Restaurants offers specialty sandwiches, fresh salads, shakes and malts. In the last quarter, the company’s earnings beat the consensus mark mainly on the back of improved revenues (especially, a 45% increase in Restaurant revenues) and comps growth.
Comps went up 13.2% in the first quarter, thanks to an increase in average transaction amount. In fact, the company’s restaurants have generated 45 consecutive quarters of positive comparable restaurant sales growth led by customer traffic increase. The improvement in guest traffic reflects that the company values customers' time as it targets an average cook time of five to seven minutes from order placing to delivery. The company is also cashing on the recent popularity of the niche burger segment.
However, increase in food and paper costs is likely to continue to hurt margins in the second quarter as it did in the first. Also, with the company set to open outlets, pre-opening expenses are expected to take a toll on profits.
Earnings Whispers
Our proven model does not conclusively show that Habit Restaurants is likely to beat earnings this quarter. That 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: The Earnings ESP for Habit Restaurants stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 7 cents.
Zacks Rank: Habit Restaurants’ Zacks Rank #2 (Buy) increases the predictive power of the ESP. However, we need to have a positive ESP to be sure of an earnings surprise.
We caution against stocks with a Zacks Rank #4 or 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 companies in the restaurant sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Red Robin Gourmet Burgers Inc. RRGB, with an Earnings ESP of +2.63% and a Zacks Rank #1.
Jamba, Inc. JMBA, with an Earnings ESP of +5.00% and a Zacks Rank #3.
Shake Shack Inc. SHAK, with an Earnings ESP of +33.33% and a Zacks Rank #3.
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