Headquartered in Dallas, TX, Wingstop Inc. WING is set to report its second quarter results on Aug 6 after the markets close.
This will be the first quarterly results of this chicken wings restaurant chain since it began trading on NASDAQ in Jun 2015. Wingstop that specializes in cooked-to-order, hand-sauced and tossed chicken wings priced its initial public offering at $19, higher than the expected price range. Let’s see how things are shaping up for Wingstop’s first earnings results.
Factors to Consider
Driven by bold flavor offerings, large, value-oriented family packs, as well as meals for two and individual combo meals, domestic store sales of the company have grown for 11 consecutive years through 2014. Meanwhile, revenues and net income grew 14.3% and 19.3% respectively in 2014.
Consistent expansion is another key growth driver for Wingstop. Its domestic restaurant count has increased 37.5% since the end of 2011. At the end of first quarter 2015, the company operated 745 restaurants across the United States, Mexico, Russia, Singapore, the Philippines, Indonesia, and the United Arab Emirates. We expect its sales initiatives and aggressive expansion strategy to drive second quarter results of the company.
However, like other restaurant chains, higher food costs especially that of chicken would hurt the profits of the company. Also, higher labor costs and costs related to sales boost initiatives would keep the profits under pressure. Meanwhile, stiff competition and soft consumer spending also remain headwinds.
Earnings Whispers
Our proven model does not conclusively show that Wingstop is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 9 cents.
Zacks Rank: Wingstop has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with 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
Some stocks in the restaurant that have both a positive Earnings ESP and a favorable Zacks Rank are:
Jack in the Box Inc. JACK with an Earnings ESP of +2.74% and a Zacks Rank #1 (Strong Buy).
Red Robin Gourmet Burgers Inc. RRGB with an Earnings ESP of +2.63% and a Zacks Rank #2 (Buy).
Shake Shack Inc. SHAK with an Earnings ESP of +33.33% and a Zacks Rank #3 (Hold).
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