Why Shake Shack’s 3Q17 Earnings Failed to Impress Investors

Rajiv  Nanjapla - Author

Nov. 6 2017, Published 9:32 a.m. ET

Performance in 3Q17

Shake Shack (SHAK), which posted its 3Q17 earnings results after the market closed on November 1, 2017, had adjusted EPS (earnings per share) of $0.17 on revenue of $94.6 million. The company’s revenue rose 26.9% from 3Q16, while its EPS rose 13.3%.

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Stock performance

In 3Q17, analysts were expecting EPS of $0.15 on revenue of $94.5 million. The company’s SSSG (same-store sales growth) fell 1.6%, whereas analysts were expecting a fall of -2.6%. After posting strong 3Q17 earnings, the company increased its SSSG, revenue, and unit growth guidance for 2017. Despite posting better-than-expected 3Q17 earnings, the company saw its stock price fall due to weakness in the broader equity market and investors’ concerns that aggressive expansion could lead to cannibalization of old restaurants. As of November 3, 2017, Shake Shack was trading at $36.98, which represents a fall of o.5% since the announcement of its 3Q17 earnings.

Year-to-date performance

Since the beginning of 2017, Shake Shack stock has risen 3.3%. During the same period, Wendy’s (WEN) has risen 11.1%, Chipotle Mexican Grill (CMG) has fallen 27.5%, and Jack in the Box (JACK) has fallen 8.0%. The S&P 500 (SPX) and the iShares US Consumer Services ETF (IYC) have risen 15.6% and 9.6%, respectively.

Series overview

In this series, we’ll look at Shake Shack’s 3Q17 earnings call and compare its 3Q17 performance with analysts’ estimates. We’ll also look at management’a guidance and analysts’ estimates for the next four quarters. Finally, we’ll wrap up the series by looking at Shake Shack’s valuation and analysts’ recommendations. Let’s start our analysis by looking at Shake Shack’s 3Q17 revenue.


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