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Restaurant companies' second-quarter 2024 results are likely to be bolstered by increased menu prices, higher average check sizes, and expansion initiatives. Many restaurant companies have also benefited from partnerships with delivery services and digital platforms.

Restaurant operators have been focused on digital innovation, sales-building strategies, and cost-saving measures. Digital innovation has become crucial, with partnerships with delivery services like DoorDash, Grubhub, Postmates, and Uber Eats playing a significant role in boosting sales. Additionally, the introduction of self-service kiosks and loyalty programs bodes well.

Industry players are likely to have benefited from the rise in off-premise sales, including delivery, takeout, drive-thru, catering, meal kits, and off-site options like kiosks and food trucks in the second quarter. Many operators also tested ghost or virtual kitchens, which have received positive customer feedback. The combination of off-premise offerings and connected curbside services has further driven customer satisfaction and industry growth.

The latest Earnings Trend report suggests that the Zacks Retail-Wholesale sector’s second-quarter earnings are expected to increase 7.3% from the year-ago period’s reported figure. The previous quarter recorded a 28.1% increase. The sector’s revenues are projected to increase 4.4%, compared with 5% reported in the previous quarter. However, margins are expected to increase 0.2%.

Companies from the restaurant industry, such as BJ's Restaurants, Inc. (BJRI - Free Report), Wingstop Inc. (WING - Free Report), and Chipotle Mexican Grill, Inc. (CMG - Free Report), are expected to beat estimates in the ongoing reporting cycle.

However, high costs are likely to have negatively impacted the companies' margins to some extent in second-quarter 2024. Intense competition, high wages, and food cost inflation are concerning. The industry continues to bear increased expenses, which have been affecting margins. Higher pre-opening costs, marketing expenses, and costs related to sales-boosting initiatives have also been exerting pressure on the companies' margins.

How to Make the Right Pick?

Given the wide range of companies in this space, this task is by no means easy. While it is impossible to be sure of the outperformers, our proprietary methodology — a positive Earnings ESP along with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) — makes it relatively simple. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP is our proprietary methodology for identifying stocks with high chances of delivering a surprise in their upcoming earnings announcements. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with the above-mentioned combination, chances of a positive earnings surprise are as high as 70%.

Our Choices

Here we discuss in detail the three above-mentioned restaurant companies that are likely to beat estimates this time around.

BJ's Restaurants, Inc.

This company is scheduled to report second-quarter 2024 results on July 25. The stock currently sports a Zacks Rank #3 (Hold) and has an Earnings ESP of +9.25%.

BJ's Restaurants’ second-quarter top line is likely to have been aided by productivity and margin enhancement initiatives, as well as operational excellence across its restaurants. Also, the company’s expansion, remodeling, and digital initiatives are encouraging.

The Zacks Consensus Estimate for second-quarter 2024 earnings is pegged at 49 cents per share, suggesting a decline of 2% from 50 cents reported in the prior-year quarter.

BJ's Restaurants, Inc. Price and EPS Surprise

Image Source: Zacks Investment Research, BJ's Restaurants, Inc. Quote

Wingstop Inc.

This company is slated to report fiscal second-quarter fiscal 2024 results on July 31. The stock currently has an Earnings ESP of +2.03% and a Zacks Rank #1 (Strong Buy).

The company’s second-quarter results are likely to benefit from delivery channel expansion, menu innovation, and digital marketing initiatives. Also, its supply-chain strategy and robust unit economics have been adding to the positives.

The Zacks Consensus Estimate for second-quarter fiscal 2024 earnings is pegged at 80 cents per share, suggesting growth of 40.4% from 57 cents reported in the prior-year quarter.

Wingstop Inc. Price and EPS Surprise

Image Source: Zacks Investment Research, Wingstop Inc. Quote

Chipotle Mexican Grill, Inc.

Finally, Chipotle is scheduled to report second-quarter 2024 results on July 24. The stock currently has an Earnings ESP of +0.72% and a Zacks Rank #3 (Hold).

Chipotle's second-quarter performance is likely to have benefited from its digital efforts, Chipotlane add-ons, and marketing initiatives. These, along with strength in digital sales and new restaurant openings, have been driving the company.

Chipotle Mexican Grill, Inc. Price and EPS Surprise

Image Source: Zacks Investment Research, Chipotle Mexican Grill, Inc. Quote

We expect food and beverage revenues to increase 16.2% year-over-year. Moreover, delivery service revenues are expected to reach $19.3 million, up 11.5% year-over-year.

The Zacks Consensus Estimate for second-quarter 2024 earnings is pegged at 31 cents per share, suggesting growth of 24% from 25 cents reported in the prior-year quarter.

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