What to Expect From Zoe's Kitchen (ZOES) in Q4 Earnings?

Zoe's Kitchen, Inc. ZOES is slated to report fourth-quarter 2017 results on Feb 22, after market close.

The company’s earnings surprise history has not been impressive as it missed estimates in two of the last four quarters, with an average negative surprise of 38.89%.

Also, the stock has declined 41.1% in a year’s time against 8.5% gain of the industry it belongs to.

In fact, Zoe's Kitchen has been facing the brunt of the challenging restaurant environment in the United States. Evidently, consumer’s change in preferences has substantially reduced traffic, which in turn affected comps. Consequently, the company witnessed negative comps in the first three quarters of 2017.

Unit Expansion to Drive Revenues

Despite the negative comps, the top line improved year over year in the first nine months of 2017 on several unit openings. Total revenues also increased 13.4% to $242.7 million during the same time period. The trend is likely to continue in the to-be-reported quarter buoyed by consistent unit expansion along with increased focus on catering and delivery services. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $72 million, reflecting 16.1% year-over-year growth.

Zoe's Kitchen, Inc. Revenue (TTM)

Zoe's Kitchen, Inc. Revenue (TTM) | Zoe's Kitchen, Inc. Quote

Expenses to Continue Mar Profits

However, increasing labor costs along with higher store operating expenses and extensive investments in sales-boosting initiatives might mar the quarter’s profits. The consensus estimate for fourth-quarter loss is pegged at 13 cents, which is 85.7% wider than the prior-year quarter figure.

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zoe's Kitchen has an Earnings ESP of +13.16% and a Zacks Rank #3, a combination that increases the odds of an earnings beat.

Stocks That Warrant a Look

Here are some stocks that you may want to consider as our model shows these have the right combination of elements to post a positive earnings surprise:

Del Frisco's Restaurant Group DFRG has an Earnings ESP of +1.54% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Carrols Restaurant Group TAST has an Earnings ESP of +180.00% and a Zacks Rank of 3.

Bloomin' Brands, BLMN has an Earnings ESP of +0.97% and a Zacks Rank #3.

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