BJ’s Restaurants Inc. (BJRI) reported first quarter 2010 earnings on April 22, 2010 that surpassed the Zacks Consensus Estimate by a penny. Below we will cover the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for both the short-term and the long-term outlook for the stock.
Earnings Report Review
During first quarter 2010, BJ’s Restaurants reported revenues of $121.7 million, up 18.8% year over year, sustained on operating efficiencies, improved kids’ menu and lunch offerings. These have also helped to drive traffic that remains positive for the first time since the third quarter of 2007. Comparable-restaurant sales for the quarter grew substantially by 4.4%.
(Read our full coverage on this earnings report: BJ’s Restaurants Revs Climb)
Earnings Estimate Revisions: Overview
Estimates have moved up for BJ’s Restaurants since the earnings release, with analysts optimistic about the long-term performance of the company. The earnings estimate details are discussed below.
Agreement of Analysts
Revision trends in the last 30 days drifted toward the positive side with fewer negative changes. Revisions for fiscal 2010 estimates scored positive as 12 analysts moved upward while only 1 analyst moved downward. Estimate revisions for fiscal 2011 were also positive with 8 upgrades and 1 downgrade.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for both fiscal 2010 and 2011 rose 3 cents per share to 68 cents and 84 cents, respectively. This is encouraging news for the company and signifies a gradual improvement in the restaurant industry, which has braved extremely tough times due to the economic turmoil.
BJ’s Restaurants in Neutral Lane
We remain positive on BJ’s Restaurants as the company has a unique position in the commoditized hyper-competitive bar and grill business and a healthy balance sheet. With the overall U.S. economy reviving gradually, we believe that strong comparable-store sales and moderate costs will help restaurant operators to deliver better numbers in the current year than 2009. In the near term, the company is well positioned to sustain its growth momentum, on the heels of operating efficiencies and innovative offerings.
However, we remain skeptical about the company’s near-term prospects due to an unfavorable consumer spending pattern and increased competition from other casual dining operators. In addition, more than two-thirds of total restaurants are located in areas that have been hard hit by the recent downturn.
Accordingly, we keep our conservative view on BJ’s Restaurants shares and maintain a Zacks #3 Rank, which translates into a short-term Neutral recommendation. Our long-term recommendation for the stock also remains in the middle of the road at Neutral.
Apart from BJ’s Restaurants there is another stock that promises long-term growth opportunities is Chipotle Mexican Grill Inc. (CMG), in which we currently have an Outperform recommendation as it remained largely unruffled by the recent economic slowdown and reported a strong first quarter earnings of $1.19 per share outpacing the Zacks Consensus Estimate of 95 cents.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
Read the full analyst report on “BJRI”
Read the full analyst report on “CMG”
Zacks Investment Research
