Analysts Expect Shake Shack’s Earnings to Fall



Analysts’ expectations

For the next four quarters, analysts expect Shake Shack (SHAK) to post an EPS of $0.52—a fall of 16.1% from $0.62 in the same four quarters the previous year.

Despite revenue growth and a lower effective tax rate, Shake Shack’s EPS is expected to fall due to a decline in the EBIT margin. Analysts expect Shake Shack’s EBIT margin to fall from 9.7% to 6.3%. The increased cost of sales, labor expenses, other operating expenses, and G&A (general and administrative) costs are expected to lower Shake Shack’s EBIT margin.

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Volatility in the beef market is expected to increase the company’s cost of sales. The labor expenses are expected to rise due to higher labor wages and opening new restaurants, which requires higher labor in the initial phase. The company’s operating cost is expected to rise due to higher facility costs and potential delivery commissions. Increased investments in Project Concrete, which focuses on improving Shake Shack’s core financial and operational systems, is expected to increase the company’s G&A expenses.

Peer comparisons

During the same period, Chipotle Mexican Grill (CMG), Jack in the Box (JACK), and Wendy’s (WEN) are expected to post EPS growth of 42.6%, 12.0%, and 23.9%, respectively.

Next, we’ll discuss analysts’ recommendations and Shake Shack’s valuation multiple.


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