The Habit Restaurants, Inc. HABT is set to report third-quarter 2015 results on Nov 4, after the market closes. The company started trading in Nov 2014. Last quarter, the company posted a positive earnings surprise of 28.57%. This is the second consecutive quarter that the company has posted an earnings surprise.
Let’s see what is in store this quarter.
Factors at Play
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 37% increase in Restaurant revenues as well as comps growth. The trend is expected to continue in the third quarter, with the company’s increased focus on menu innovation and unit growth.
Comps went up 8.9% in the last quarter, thanks to an increase in average transaction amount. In fact, the company’s restaurants have generated 46 consecutive quarters of positive comparable restaurant sales growth led by customer traffic increase. The company targets an average cook time of five to seven minutes from order placing to delivery, which drove customer traffic. The company is also cashing in on the recent popularity of the niche burger segment. These positives are likely to aid results in the to-be-reported quarter as well.
However, increases in labor and related expenses – mainly due to an upward spike in wages across most markets – is likely to continue to hurt margins in the third quarter as it did in the second. Also, with the company set to open several outlets, pre-opening expenses might 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 is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 5 cents.
Zacks Rank: Habit Restaurants’ Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
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:
Wingstop Inc. WING, with an Earnings ESP of +11.11% and a Zacks Rank #2.
Popeyes Louisiana Kitchen, Inc. PLKI, with an Earnings ESP of +2.27% and a Zacks Rank #2.
Bob Evans Farms, Inc. BOBE, with an Earnings ESP of +2.5% and a Zacks Rank #1
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
Be the first to comment