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Will BJ's Restaurants (BJRI) Q1 Earnings Pull a Surprise?

BJ's Restaurants, Inc. BJRI is set to report first-quarter 2016 results on Apr 21.

Last quarter, the company delivered a positive earnings surprise of 10.3%, bringing the average surprise for the trailing four quarters to 21.3%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

The company’s Project Q initiatives, which reduced average kitchen hours leading to labor efficiencies, have led to strong margins in the past few quarters and are expected to continue to do so in the to-be-reported quarter.

Moreover, menu innovation, trimming down of complicated menus, prudent expansion initiatives, and aggressive marketing and operational strategies are expected to continue to boost sales in the first quarter and thereafter. Also, the company’s investments in technology-driven initiatives, like digital ordering, should continue to boost sales.

Though the company is committed to raise its operating margins through cost containment initiatives, higher cost of sales and labor costs due to higher wages are expected to keep profits under pressure.

Earnings Whispers

Our proven model does not conclusively show that BJ's Restaurants is likely to beat earnings 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. That is not the case here as you will see below.

Zacks ESP: The company’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 41 cents.   

Zacks Rank: BJ's Restaurants has a Zacks Rank #2, which increases the predictive power of the ESP. However, we need to have a positive ESP to be confident of an earnings beat.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement.

Stocks to Consider

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

Darden Restaurants, Inc. DRI, with an Earnings ESP of +0.93% and a Zacks Rank #1.

Dave & Buster's Entertainment, Inc. PLAY, with an Earnings ESP of +1.69% and a Zacks Rank #1.

The Cheesecake Factory Incorporated CAKE, with an Earnings ESP of +1.67% and a Zacks Rank #2.

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CHEESECAKE FACT (CAKE): Free Stock Analysis Report
 
BJ'S RESTAURANT (BJRI): Free Stock Analysis Report
 
DARDEN RESTRNT (DRI): Free Stock Analysis Report
 
DAVE&BUSTRS ENT (PLAY): Free Stock Analysis Report
 
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