Chicago, IL – January 29, 2025 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Brinker International, Inc. EAT, Chipotle Mexican Grill, Inc. CMG, The Cheesecake Factory Inc. CAKE, Wingstop Inc. (WING) and Shake Shack Inc. SHAK.
Here are highlights from Tuesday’s Analyst Blog:
5 Restaurant Stocks Poised for Earnings Surprises This Season
The Restaurant industry in the fourth quarter of 2024 is likely to have been aided by increased sales. Rapid menu price hikes, average check growth and expansion efforts bode well. By focusing on innovation and broadening menu selections, restaurants aim to cater to a wider audience and boost same-store sales growth.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
According to an analysis by Black Box Intelligence, quick-service restaurant brands have demonstrated remarkable stability and resilience in both traffic and sales. The report attributes this consistent performance to the spending behavior of price-conscious consumers, who continue to support the segment's steady earnings.
The industry is gaining from the increase in off-premise sales, which primarily include delivery, takeout, drive-thru, catering, meal kits and off-site options, such as kiosks and food trucks. Most restaurant operators have initiated the testing of ghost or virtual kitchens. The idea of providing off-premise offerings and a connected curbside service has been garnering positive customer feedback.
Restaurant operators constantly partner with delivery channels and digital platforms to drive incremental sales. Partnerships with delivery channels like DoorDash, Grubhub, Postmates and Uber Eats and the rollout of self-service kiosks and loyalty programs continue to drive growth.
Then again, restaurant operators are grappling with the high cost of operations. The industry continues to bear increased expenses, which have been affecting margins. Higher pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on the company's margins.
How to Make the Right Pick?
Given the wide range of companies in this space, the task is by no means easy. While it is impossible to be sure of the outperformers, our proprietary methodology — a positive Earnings ESP, along with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — makes it relatively simple. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for identifying stocks with high chances of delivering a surprise in their upcoming earnings announcements. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with the abovementioned combination, chances of a positive earnings surprise are as high as 70%.
Our Choices
Here we have discussed in detail restaurant companies that are likely to beat estimates this time:
Brinker International, Inc. is scheduled to report second-quarter fiscal 2025 results on Jan. 29. EAT currently carries a Zacks Rank #2 and has an Earnings ESP of +9.99%. You can see the complete list of today's Zacks #1 Rank stocks here.
Brinker's fiscal second-quarter revenues are likely to have increased year over year, fueled by effective marketing strategies, improved menu pricing, higher traffic and a favorable menu item mix. The company's focus on enhancing core menu offerings at Chili's, such as its "core four" and "five to drive" strategies, is expected to have boosted top-line performance. Additionally, Maggiano's operational improvements, including service speed enhancements and menu updates, are likely to have contributed to sales growth.
The Zacks Consensus Estimate for second-quarter fiscal 2025 earnings is pegged at $1.69 per share, suggesting growth of 70.7% from 99 cents reported in the prior-year quarter/
Chipotle Mexican Grill, Inc. is scheduled to report fourth-quarter 2024 results on Feb. 4. CMG currently has an Earnings ESP of +1.00% and a Zacks Rank #2.
Chipotle's fourth-quarter performance is likely to have benefited from its digital efforts, Chipotlane add-ons and marketing initiatives. This, along with strength in digital sales and new restaurant openings, bodes well.
The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 24 cents per share, implying growth of 14.3% from 21 cents reported in the prior-year quarter.
The Cheesecake Factory Inc. is likely to report an increase in earnings and revenues in the fourth quarter of 2024. CAKE currently has an Earnings ESP of +2.20% and a Zacks Rank #2.
The company's fourth-quarter 2024 results are likely to benefit from its focus on service digitization, new menu offerings or bringing back customers' favorites, and new restaurant openings, especially with Chipotlanes.
The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 91 cents per share, suggesting growth of 13.8% from 80 cents reported in the prior-year quarter
Wingstop Inc. is scheduled to report fourth-quarter 2024 results on Feb. 19. WING currently has an Earnings ESP of +2.18% and a Zacks Rank #3.
The company is likely to have benefited from comps growth, unit expansion and technological initiatives. Its focus on strategic partnerships bodes well. Additionally, Wingstop has made significant strides in brand awareness, leveraging high-profile partnerships to elevate its visibility. Recent collaborations with the NFL and NBA, including becoming the official chicken partner of the NBA, have helped WING reach new audiences and achieve record levels of guest acquisition. However, elevated costs are a concern.
The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 86 cents per share, suggesting growth of 34.4% from 64 cents reported in the prior-year quarter.
Shake Shack Inc. is likely to report an increase in earnings and revenues in the fourth quarter of 2024. SHAK currently has an Earnings ESP of +0.65% and a Zacks Rank #2.
The company's fourth-quarter 2024 results are likely to benefit from robust same-shack sales, digital initiatives and unit expansion. The emphasis on innovative menu offerings, targeted promotions and expanded digital bodes well. It has also been making more investments in digitization to sustain its digital guest enhancement strategies in the near term. The company's efforts to enhance guest engagement and brand visibility through effective marketing strategies are supporting its performance in a competitive market.
The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 25 cents per share, calling for growth of 1,150% from 2 cents reported in the prior-year quarter.
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