Buffalo Wild Wings (BWLD) Q2 Earnings: Stock To Disappoint?

Buffalo Wild Wings Inc. (NASDAQ:BWLD) is scheduled to report second-quarter 2017 results on Jul 26, after the market closes.

Last quarter, Buffalo Wild Wings saw an earnings miss of 14.29%. Moreover, the trailing four-quarter average earnings surprise is a negative 10.69%.

Buffalo Wild Wings, Inc. Price and EPS Surprise

Factors at Play

After four consecutive quarters of comps decline, Buffalo Wild Wings finally witnessed marginal comps growth in the last reported quarter. This upside was driven by the company’s strong market position, new menu launches and investing in guest experience, among other initiatives.

In fact, Buffalo Wild Wings’ efforts to revive comps growth via promotional offerings, better food presentation, along with various digital initiatives including the revamp of its mobile app is expected to boost second-quarter results too.

Meanwhile, increased focus on better staffing in the take-out area and improving operational execution is likely to further boost take-out sales, a growing segment of the company’s overall revenue stream. Additionally, the variety and convenience of its FastBreak program is expected to have improved lunch-time sales in the quarter.

However, Buffalo Wild Wings has been witnessing declining traffic trends, of late. In fact, we believe that the menu price increases made by the company, along with a soft consumer spending environment in the U.S. restaurant space might affect traffic trends further, thereby putting the quarter’s comps under pressure.

Furthermore, fluctuation in the price of chicken – a key ingredient for the company – might hurt the quarter’s profitability and remains a major cause of concern. Also, the company’s promotion of Half-Price Wing Tuesdays further puts pressure on its cost of sales as the high priced wings items are offered at lower prices. In fact, the increase in this promotion mix last quarter had an adverse impact of 37 cents on the company’s earnings per share. This trend might have continued in the to-be-reported quarter, as well.

Meanwhile, costs related to company’s sales boosting initiatives like unit expansion and higher labor costs due to the competitive labor market are estimated to continue denting profits in the second quarter.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Buffalo Wild Wings this quarter. This 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 -5.94%. This is because the Most Accurate estimate is 95 cents, while the Zacks Consensus Estimate is pegged higher at $1.01. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Buffalo Wild Wings has a Zacks Rank #5 (Strong Sell).

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

Stocks to Consider

Here are some companies you may want to consider from the same industry, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

YUM! Brands, Inc. (NYSE:YUM) has an Earnings ESP of +1.64% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

McDonald’s Corporation (NYSE:MCD) has an Earnings ESP of +0.62% and a Zacks Rank #3.

Texas Roadhouse, Inc. (NASDAQ:TXRH) has an Earnings ESP of +1.89% and a Zacks Rank #3.

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