Buffalo Wild Wings Likely to Beat - Analyst Blog

By Zacks | February 11, 2013 AAA

The owner and operator of casual dining restaurant chain, Buffalo Wild Wings Inc. (BWLD) is expected to beat the Zacks Consensus Estimates when it reports fourth quarter and full year 2012 results on Feb 12, 2013, after the closing bell.

Why a Likely Positive Surprise?

Our proven model shows that Buffalo Wild Wings is likely to beat earnings as it has the appropriate combination of two key ingredients:

Positive Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +1.05%. This is a meaningful and leading indicator for a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Buffalo Wild Wings currently retains a Zacks Rank #3 (Hold) which increases the predictive power of its ESP.

The combination of the stock's Zacks Rank #3 (Hold) and +1.05% Earnings ESP makes us confident of a positive earnings surprise in the to-be-reported quarter. Stocks with Zacks Ranks of #1, #2 and #3 have significantly higher chances of beating the earnings.

What is Driving the Better Than Expected Earnings?

Buffalo Wild Wings with its increasing comparable store sales (comps) growth is comfortably positioned to enhance its business further. During the first four weeks of the fourth quarter of 2012, comps nudged up 3.8% at company-owned restaurants and 5.6% at franchise locations buoyed by a rise in menu prices, new menu offerings and traffic growth.

The company's expansion initiatives through opening new units and acquisitions are considered to be key growth drivers. The company plans to open around 24 company-owned and 20 franchised restaurants in the fourth quarter of 2012 and it also targets to achieve a unit growth of 12% in 2012.

Further, Buffalo Wild Wings' growing free cash flow, debt-free balance sheet and strong cash position will also ensure a stable growth profile.

Hence, even if the company's earnings were low during the past two successive quarters due to higher wing costs, the company is likely to post positive results, going forward.

Other Stocks to Consider

Buffalo Wild Wings is not the only stock performing impressively this earnings season. We also observe that there are other companies, which are likely to beat earnings.

AFC Enterprises Inc. (AFCE) has Earnings ESP of +6.45% and a Zacks Rank #2 (Buy).
 
Chuy's Holdings, Inc. (CHUY) has Earnings ESP of +7.14% and a Zacks Rank #2 (Buy).

Domino's Pizza, Inc. (DPZ) has Earnings ESP of +6.67% and a Zacks Rank #3 (Hold). The company is also scheduled to report its earnings results on Feb 28.

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