Shake Shack (SHAK) reports break-even for the second quarter

Shake Shack (SHAK) reported breakeven quarterly earnings per share compared to the Zacks Consensus Estimate of a loss of $0.02. For comparison, a year ago earnings per share were $0.05. These numbers have been adjusted for one-off items.

This quarterly report is a 100% earnings surprise. A quarter ago, it was expected that this burger chain would post a loss of $0.22 per share when it actually produced a loss of $0.19, delivering a surprise of 13.64%.

The company has topped consensus EPS estimates three times over the last four quarters.

Shake Shack, which belongs to the Zacks Retail – Restaurants industry, posted revenues of $230.75 million for the quarter ended June 2022, missing the Zacks Consensus Estimate by 3.05%. For comparison, revenues from a year ago amounted to $187.46 million. The company has topped consensus revenue estimates twice over the last four quarters.

The sustainability of the immediate share price movement based on the recently-released numbers and future earnings expectations will largely depend on management’s commentary on the earnings call.

Shake Shack shares have lost about 24.6% year to date compared with the S&P 500’s decline of -12.8%.

What’s next for Shake Shack?

While Shake Shack has underperformed the market this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no simple answers to this key question, but one reliable measure that can help investors address this issue is the company’s earnings prospects. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of the earnings release, the estimate revision trend for Shake Shack is mixed. While the magnitude and direction of estimate revisions may change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) stock. Therefore, the company’s stock is expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the next quarters and the current fiscal year change in the coming days. The current consensus EPS estimate is for Breakeven on $245.19M in revenues for the coming quarter and -$0.32 on $938.42M in revenues for the current fiscal year.

Investors should be aware that the outlook for the industry may also have a significant impact on share prices. In terms of the Zacks Industry Rank, the Retail – Restaurants industry is currently in the bottom 24% of the 250+ Zacks industries. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Yet another company in the same industry, Wendy’s (WEN), has yet to report earnings for the quarter ending June 2022. The results are expected to be released on August 10.

The hamburger chain is expected to post quarterly earnings per share of $0.22 in its upcoming report, representing a year-over-year change of -18.5%. The consensus EPS estimate for the quarter has been revised down 2% over the last 30 days to the current level.

Wendy’s revenue is expected to be $541.27 million, up 9.7% from the year-ago quarter.

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

Shake Shack, Inc. (SHAK): Free Stock Analysis Report

The Wendy’s Company (WEN): Free Stock Analysis Report

To read this article on Zacks.com click here.