Can Famous Dave's of America (DAVE) Surprise this Earnings Season?
Minnesota-based fast casual chain Famous Dave's of America Inc. (DAVE) is set to report second-quarter 2014 results on Jul 30, after the market closes. Last quarter, the company posted positive earnings surprise of 91.7%. Let’s see how things are shaping up for this announcement.
Factors to be Considered this Quarter
Famous Dave’s of America reported disappointing comps in the first quarter of 2014, as same-store sales decreased 4.9% at company-owned restaurants and 3.3% at franchised restaurants. Inclement weather affected results to a large extent at the company-operated picnic themed restaurants. Additionally, marketing initiatives and promotional discounts hurt profits at the restaurants.
We expect comps to improve going into the second quarter as the spring and summer months have historically been better for Famous Dave’s of America’s business. Additionally, the launch of a new website enabling digital ordering will help the company boost sales in the second quarter, in our view.
However, the U.S. Department of Agriculture’s latest report that overall U.S. food inflation will remain near historic highs in 2014 might be a bad news for the company in the second quarter. With prices for meat and seafood rising due to diseases and widespread drought, commodity costs are expected to rise. This is especially alarming for the company as it operates in an intensely competitive segment and this might dent the profits. Although the company is taking steps to lower costs and operational efficiency, increased commodity costs are expected to hurt margins in the second quarter.
Earnings Whispers?
Our proven model does not conclusively show that Famous Dave’s of America 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, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +2.63%.
Zacks Rank: However, Famous Dave’s of America’s Zacks Rank #4 lowers the predictive power of ESP.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies in this industry which are expected to beat earnings this season:
Texas Roadhouse, Inc. (TXRH), with an Earnings ESP of +3.03% and a Zacks Rank #3 (Hold).
Buffalo Wild Wings Inc. (BWLD), with an Earnings ESP of +3.33% and a Zacks Rank #3.
Jack in the Box Inc. (JACK), with an Earnings ESP of +3.51% and a Zacks Rank #3.
Read the Full Research Report on BWLD
Read the Full Research Report on JACK
Read the Full Research Report on TXRH
Read the Full Research Report on DAVE
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