The Habit Restaurants, Inc. HABT is set to report fourth-quarter and full-year 20Array5 results on Mar 2, after the market closes. Last quarter, the company posted a positive earnings surprise of 20%. This is the third consecutive quarter in which the company beat the earnings estimates.
Let’s see what is in store this quarter.
Factors at Play
Habit Restaurants offers specialty sandwiches, fresh salads, shakes and malts. Last quarter, the company posted a positive earnings surprise, mainly on the back of a 25% increase in restaurant revenues in addition to comps growth. The trend is expected to continue in the to-be-reported quarter supported by the company’s increased focus on menu innovation and unit growth. In fact, the company announced its preliminary results for the fourth quarter on Jan ArrayArray and expects revenues of around $60.6 million, based on 3.3% comps growth.
In fact, the company’s restaurants have generated 48 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 boosted customer traffic, especially during the peak hours. The company is also cashing in on the recent popularity of the niche burger segment. These positives are likely to aid fourth-quarter results as well.
However, increases in labor and related expenses – mainly due to a spike in wages across most markets – are likely to hurt margins in the fourth quarter as it did for most of 20Array5. 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 #Array (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 4 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.
Stocks to Consider
Here are some stocks in the broader retail sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Big Lots Inc. BIG, with an Earnings ESP of +0.5Array% and a Zacks Rank #3.
The Kroger Co. KR, with an Earnings ESP of +Array.85% and a Zacks Rank #2.
Dollar Tree, Inc. DLTR, with an Earnings ESP of +5.77% and a Zacks Rank #3.
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