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Will High Cost Affect BJ's Restaurants (BJRI) Q4 Earnings?

BJ’s Restaurants, Inc. BJRI is scheduled to report fourth-quarter 2017 results on Feb 22, after market closes.

Despite undertaking various sales building efforts, BJ’s Restaurants have been bearing the brunt of soft consumer demand and pressurized sales which is likely to reflect in the fourth-quarter results. Also, high costs might have had dented earnings in the to-be-reported quarter.

The company’s shares have gained 2.8% in the past year underperforming the industry’s growth of 9.4%.

Let’s look at how the company’s revenues and earnings will shape up in the to-be-reported quarter.

Revenues Likely to Get Affected by Lesser Store Openings

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $260 million, reflecting a year-over-year decline of 2.1%. The company’s plans to open fewer number of restaurants than what was projected earlier is perhaps reflected in the revenue decline.

Given a challenging restaurant environment, BJ’s Restaurants has made a strategic decision to focus more on menu innovation and other ways to drive traffic. But the company has reduced the number of planned restaurant openings to 10 in 2017 compared with 17 restaurant openings in the prior year.

This slowdown in company’s development plan may somewhat dent sales growth in the to-be-reported quarter.

High Costs to Dent Earnings

Notably, high costs of sales and labor has been a pressing concern for BJ’s Restaurants’ earnings. In the third-quarter, adjusted earnings of 15 cents per share declined 50% year over year and the downtrend is expected to continue in the to-be-reported quarter as well since the company had lined up an array of sales building efforts for the quarter.

Further, pre-opening costs, higher marketing expenses as well as costs related to menu innovation and digital initiatives might have pressurized margins and consequently earnings in the to-be-reported quarter.

Subsequently, the consensus estimate for earnings is 33 cents, reflecting a 40% decline from the year-ago quarter.

Our Quantitative Model Predicts a Beat

BJ’s Restaurants has the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

Zacks ESP: The company has an Earnings ESP of +0.17%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BJ’s Restaurants has a Zacks Rank #3.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

BJ's Restaurants, Inc. Price and EPS Surprise

Other Stocks to Consider

Here are a few stocks from the restaurant space that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Domino’s DPZ has an Earnings ESP of +0.37% and a Zacks Rank #2 (Buy). The company is slated to report quarterly numbers on Feb 20. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cheesecake Factory CAKE has an Earnings ESP of +0.82% and a Zacks Rank #3. The company is slated to report quarterly results on Feb 21.

Zoe's Kitchen ZOES has an Earnings ESP of +13.16% and a Zacks Rank #3. The company is slated to report quarterly numbers on Feb 22.

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