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Tickers in this Article: BJRI, BJRI
BJ's Restaurants (BJRI) recently reported its second straight earnings miss, driven by declining same-store sales and profit margins.Analysts revised their estimates meaningfully lower for both 2013 and 2014 after the latest miss, sending the stock to a Zacks Rank #5 (Strong Sell).The valuation picture does not look attractive either with shares trading at a lofty 28x forward earnings. Investors should consider waiting for earnings momentum to turn positive before establishing a position.BJ's Restaurants owns and operates 143 casual dining restaurants under the BJ's Restaurant & Brewery, BJ's Restaurant & Brewhouse, BJ's Pizza & Grill and BJ's Grill brand names. Its restaurants are primarily located in California (63), Texas (29) and Florida (15), but it also has locations in 12 other states.Third Quarter ResultsBJ's Restaurants delivered disappointing third quarter results on October 24. Earnings per share came in at 13 cents, missing the Zacks Consensus Estimate of 17 cents. This was a 46% decline from the same quarter last year.Total revenues rose 7% to $188.2 million, short of the consensus of $195.0 million. Same-store sales fell 2.2%.Operating income declined 61% year-over-year to $3.5 million as the operating margin fell to just 1.9%. This decline was primarily driven by higher labor and benefit expenses, higher depreciation and amortization expenses, and higher occupancy and operating costs.Estimates FallingFollowing the Q3 miss, analysts revised their estimates significantly lower for both 2013 and 2014, sending the stock to a Zacks Rank #5 (Strong Sell).You can see the sharp decline in estimates in the company's 'Price & Consensus' chart:The Zacks Consensus Estimate for 2013 is now $0.88, down from $1.03 before the latest earnings report. The 2014 consensus is currently $1.00, down from $1.26 over the same period.Premium ValuationThe valuation picture for BJ's Restaurants does not look attractive either. Shares trade around 28x 12-month forward earnings, well above the industry median of 21x.The Bottom LineWith declining same-store sales, falling earnings estimates and premium valuation, investors should consider avoiding BJ's Restaurants until its earnings momentum turns around.Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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