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Will Shake Shack’s 1Q17 Earnings Boost Its Stock Price?

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Stock performance

New York–based fine-casual restaurant Shake Shack (SHAK) is all set to announce its 1Q17 earnings on May 4, 2017.

Although Shake Shack’s 4Q16 revenue and EPS (earnings per share) were in line with analysts’ estimates, the stock’s price fell due to lower-than-expected SSSG (same-store sales growth). The company posted systemwide SSSG of 1.6%, compared to analysts’ estimate of 3.2%.

On April 5, 2017, Karen Holthouse, an analyst with Goldman Sachs, lowered her price target on the stock for the next 12 months from $34 to $30. She lowered the stock’s ‘EPS estimate for 2017 from $0.53 to $0.48, stating that the company’s aggressive opening of new restaurants could cannibalize customers from its existing restaurants and could lead to a fall in excitement among its customers.

The lowering of this price target also contributed to the fall of Shake Shack’s stock price. On April 28, 2017, Shake Shack was trading at $33.94, a fall of 6%.

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Year-over-year performance

Since this time in 2016, Shake Shack’s stock has fallen 5.2%. During the same period, its peers Panera Bread (PNRA) and Chipotle Mexican Grill (CMG) have returned 25.8% and 52.5%, respectively.

The iShares U.S. Consumer Services ETF (IYC) and the SPDR S&P 500 ETF (SPX) have returned 9.4%, and 6.5%, respectively, year-to-date. IYC has invested 11.5% of its holdings in restaurant and travel companies.

Series overview

In this series, we’ll look at analysts’ estimated revenue, margins, and earnings for Shake Shack in 1Q17. We’ll wrap this series up with Shake Shack’s valuation multiple and analysts’ recommendations for its next 12 months.

Let’s start by looking at Shake Shack’s 1Q17 revenue estimates.

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