Will Costs Hurt Buffalo Wild Wings (BWLD) Q4 Earnings?

Buffalo Wild Wings Inc. BWLD is set to report its fourth-quarter and full year 2015 results on Feb 3, after the market closes.

Last quarter, the company had posted a negative earnings surprise of 21.87%. In fact, the company has posted negative earnings surprises in all of the trailing four quarters. Let’s see how things are shaping up for this announcement.

Factors to Consider

Despite the sluggishly recovering economy, Buffalo Wild Wings has been witnessing positive comps over the past several quarters.

However, fourth-quarter comps are expected to be soft compared to the year-ago period owing to the lack of sporting events. The company also expects comps in the to-be-reported quarter to be negatively impacted by calendar shifts like Halloween that fell on a Saturday and Christmas that fell on a Friday.

Moreover, high chicken and labor costs have been hurting profits at the company over the past few quarters. Labor costs due to stiff competition in the market and the addition of Guest Experience Captains at its restaurants are also expected to hurt profits in soon-to-be reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Buffalo Wild Wings is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, that is not the case here, as elaborated below.

Zacks ESP: Buffalo Wild Wings has an earnings ESP of -1.35%. This is because the Most Accurate estimate stands at $1.46, while the Zacks Consensus Estimate is pegged slightly higher at $1.48.

Zacks Rank: Buffalo Wild Wings has a Zacks Rank #3, which when combined with the company’s negative ESP, makes a surprise prediction difficult.

Note that 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 companies in the restaurant industry that you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Jack in the Box Inc. JACK with an Earnings ESP of +0.97% and a Zacks Rank #1.

Kona Grill Inc. KONA with an Earnings ESP of +5.88% and a Zacks Rank #2.

McDonald's Corp. MCD with an Earnings ESP of +0.87% and a Zacks Rank #3.

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BUFFALO WLD WNG (BWLD): Free Stock Analysis Report
 
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