Why Are Analysts Optimistic of SHAK’s 3Q16 Revenue?



Revenue sources

Shake Shack (SHAK) earns its revenue from two sources: company-owned restaurant sales and licensing fees collected from franchisees. In 2Q16, SHAK’s company-owned restaurant sales accounted for 96.8% of its total revenues.

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3Q16 estimates

For 3Q16, analysts are expecting SHAK to post revenues of $69.3 billion, which would represent a 30% rise from $53.3 million in 3Q15. The growth in revenue was driven by unit growth and positive same-store sales growth.

The company operated 20 more restaurants by the end of 2Q16 than it did in 3Q15. These additions include ten new company-owned restaurants that, along with the addition of new restaurants in 3Q16, are expected to drive SHAK’s revenue in 3Q16.

For fiscal 2016, Shake Shack plans to open 18 new company-owned restaurants. With seven opened in the first two quarters, 11 are expected to open in the last two quarters of fiscal 2016.

Peer comparisons and outlook

In 3Q16, Panera Bread (PNRA) posted revenue growth of 2.9%, while Chipotle Mexican Grill’s (CMG) revenue fell 14.8%.

Analysts are expecting SHAK to post revenue of $296.3 million in the next four quarters, which represents a 31.7% YoY (year-over-year) rise. Revenue growth is expected to be driven by unit growth and positive same-store sales growth.

SHAK is also expected to increase its unit count to 131 in the next four quarters, which would mean an addition of 36 new restaurants that should contribute to revenue growth.

Next, we’ll look at same-store sales growth estimates of SHAK.


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