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Is a Surprise in Store for Wingstop (WING) in Q1 Earnings?

Dallas-based Wingstop, Inc. WING is set to report first-quarter 2017 results on May 4, after the market closes. This will be the company’s eighth quarterly results after its IPO in Jun 2015. We expect the company to surpass expectations.

Last quarter, this restaurant operator posted a positive earnings surprise of 7.14%. In fact, the company has surpassed earnings estimates in all of its seven quarters, recording an average positive surprise of 9.23% in the trailing four quarters.

Wingstop Inc. Price and EPS Surprise

Why a Likely Positive Surprise?

Our proven model shows that Wingstop is likely to beat on earnings because it has the perfect combination of the two key ingredients.

Zacks ESP: Wingstop has an Earnings ESP of +6.67% because the Most Accurate estimate is 16 cents, while the Zacks Consensus Estimate is pegged at 15 cents. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Wingstop currently sports a Zacks Rank #1 (Strong Buy). Note that stocks with a Zacks Rank #1, 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Wingstop’s favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

Wingstop, which operates as a chicken wings specialist, serves classic and boneless wings with bold flavors. The company has been reporting positive comps for 13 years on the back of menu innovation and solid unit development. We expect this trend to continue in the to-be-reported quarter as well.

Further, the company’s investments in technology to boost online ordering along with migration to a national advertising platform should drive the quarter’s results.  In fact, Wingstop continues to grow its online ordering mix and its partnership with a firm called Conversable is also likely to increase convenience for social media users, thereby improving traffic. Moreover, the company’s new POS system integrates online orders straight to the kitchen, which is expected to further bolster online ordering growth.

However, higher costs related to new openings and remodeling of units are likely to dent the company’s profits in the first quarter. Inflated bone-in chicken wings prices in the quarter are also projected to weigh on margins. Additionally, a choppy sales environment in the overall restaurant space might limit revenue growth.

Key Picks

Wingstop is not the only company looking up this earnings season. Here are some other companies in the broader Retail-Wholesale sector to consider as our model shows they also have the right combination of elements to post an earnings beat this quarter:

Best Buy Co., Inc. BBY has an Earnings ESP of +12.50% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jack in the Box, Inc. JACK has an Earnings ESP of +4.40% and a Zacks Rank #2.

J.C. Penney Company, Inc. JCP has an Earnings ESP of +100.00% and a Zacks Rank #3.

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Best Buy Co., Inc. (BBY): Free Stock Analysis Report
 
Jack In The Box Inc. (JACK): Free Stock Analysis Report
 
Wingstop Inc. (WING): Free Stock Analysis Report
 
J.C. Penney Company, Inc. Holding Company (JCP): Free Stock Analysis Report
 
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