Wednesday, April 8, 2015

Bull of the Day: BJ's Restaurants (BJRI)

Thanks to savings from lower gas prices, consumers have started spending more on dining out. Rising consumer spending bodes well for the restaurant industry and makes this Zacks rank #1 (Strong Buy) restaurant stock quite appetizing.

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About the Company


Founded in 1978 and headquartered in Orange County, CA, BJ’s Restaurants ((BJRI - Analyst Report) - Analyst Report)owns and operates a chain of 147 high-end casual dining restaurants in 17 states. Their signature menu items include deep dish pizza and craft beer. They call their positioning “contemporary, high-quality, casual plus”.

Excellent Quarterly Results

The company reported adjusted earnings of $0.31 per share for Q4, beating the Zacks Consensus Estimate of $0.21 by 48%. Earnings were also up significantly year-over-year. The improvement was thanks mainly to improved revenues and margins.

Revenues of $213.9 million were up 7.1% year over year, resulting from an improvement in comps to 1.2%, compared to the prior quarter comps growth of only 0.3% and the year-ago quarter comps decline of 2.7%. Restaurant level margins were 18.4%, up 330 basis points year-over-year.

The company opened three restaurants during the quarter and plans to open at least 15 restaurants in 2015.

A number of steps taken recently such as introduction of a new menu in February 2014, simplifying kitchen processes under project Q and cost control initiatives appear to be delivering results.

Positive Earnings Estimate Revisions

As a result of strong quarterly report, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year now stand at $1.31 per share and $1.64 per share respectively, up from $1.19 per share and $1.50 per share, 60 days ago. 

Rising estimates sent the stock back to a Zacks Rank#1 (Strong Buy) last month. The company has beaten Zacks Consensus Estimate in each of last four quarters, with an average quarterly surprise of 46%.

The Bottom Line

With healing labor market and declining oil prices, consumers are now much more willing to spend on high-quality casual dining. Thanks to favorable industry trends, a diversified business model and several steps taken recently to improve its processes, the company is moving in the right direction.

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Source : http://www.zacks.com/commentary/41450/bull-of-the-day-bj39s-restaurants-bjri

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