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Zacks Prediction for Restaurant ETF this Earnings Season

The restaurant industry appears in great shape as evident by the Zacks industry rank which is in the top 32% segment. Plus, a key player of the industry, Yum Brands Inc. (YUM), added about 4% after hours on April 20, following its earnings beat (though sales missed) in Q1 and beefed-up guidance for full-year core operating profit growth.

This is just the start of restaurant earnings which looks moderately upbeat as of now. Investors must be interested to know how the sector might be performing throughout the reporting cycle, so that they can take investing decision on the sector.

As we have a pure-play ETF on the restaurant industry, namely Restaurant ETF (BITE), the investing task becomes easier. Investors confident about the sector, but still confused about which stock to pick (even in the pack of top-rated ones), can easily play BITE (see all consumer discretionary ETFs here).

For them, we have highlighted our earnings prediction of some of the holdings of BITE (read: Time to Take a Bite into This Exclusive Restaurant ETF?).

A Bite out of Surprise Prediction

Domino's Pizza Inc. (DPZ) has a Zacks Rank #2 (Buy) and an Earnings ESP of 2.06%, giving cues of a likely earnings beat. The Zacks Consensus Estimate for first-quarter 2016 is $0.97, up 2 cents over the past three months. Further, the stock has a favorable Growth Style Score of A, though it fails on the Value score of D and Momentum score of F. The company is expected to report after the closing bell on April 28. DPZ is the top holding of BITE with 3% weight.

Texas Roadhouse (TXRH) has a Zacks Rank #2 and an Earnings ESP of 0.00%, making surprise prediction difficult. However, the earnings surprise track over the past four quarters is not good with a negative average surprise of 3.54%. However, the company witnessed positive earnings estimate revision of 2 cents over the past 60 days for the yet-to-be-reported quarter.

The stock has a Growth score of ‘A’, Value score of ‘C’ and Momentum score of ‘C’. The company will report on May 2. TERH takes the second spot in BITE with 2.86% weight.
Panera Bread Company (PNRA) is expected to release its earnings report on April 26. It has a Zacks Rank #2 but an Earnings ESP of 0.00%, again putting the odds of earnings beat in jeopardy. The company saw positive earnings estimate revision of 5 cents over the past three months for the to-be-reported quarter. It delivered positive earnings surprises in two of the last four quarters, with an average beat of 0.77%. Further, the stock has a top Growth score of A, Momentum score of B and a Value score of ‘C’. PNRA has 2.8% weight in the fund.

While these three companies are in the top 10 holdings of the restaurant ETF, investors can also take a look at the fast food behemoth McDonald’s (MCD). After all, barring McDonald’s, any discussion on the restaurant industry looks a little incomplete. MCD has about 2.69% weight in BITE.

McDonald’s is slated to release earnings on April 22. The stock has seen positive earnings estimate revision from $1.13 to $1.16 over the past 90 days for the yet-to-be-reported quarter. Three analysts upped estimates in the last seven days while none went for reduction. It has a Zacks Rank #2 and an Earnings ESP of 0.86%, making us confident of an earnings beat.

However, though the stock has a superb Momentum Style score of ‘B’, it has Value and Growth Style Score of ‘D’ each.

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THE-RESTAURANT (BITE): ETF Research Reports
 
DOMINOS PIZZA (DPZ): Free Stock Analysis Report
 
TEXAS ROADHOUSE (TXRH): Free Stock Analysis Report
 
PANERA BREAD CO (PNRA): Free Stock Analysis Report
 
MCDONALDS CORP (MCD): Free Stock Analysis Report
 
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