Will Shake Shack’s Q3 Earnings Boost Its Stock Price?



Stock performance

Shake Shack (SHAK) is scheduled to post its third-quarter earnings after the market closes on November 1. As of October 29, the company was trading at $50.07, which represents a fall of 21.7% since the announcement of its second-quarter earnings on August 2.

In the second quarter, Shake Shack posted adjusted EPS of $0.29 on revenues of $116.3 million, outperforming analysts’ EPS expectation of $0.18 and revenue expectation of $111.0 million. Despite strong second-quarter results, the company’s management didn’t raise its 2018 guidance, citing a delay in the opening of its new restaurants. Investors, who were expecting the company to raise its guidance, were disappointed. Also, the traffic at Shake Shack’s restaurants declined by 2.6% during the quarter, leading to a fall in the company’s stock price.

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Peer comparisons

Despite the recent decline in Shake Shack’s stock price, the company is still trading 15.9% higher YTD. In comparison, peers Chipotle Mexican Grill (CMG) and McDonald’s (MCD) have returned 52.5% and 0.6%, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests ~8.0% of its holdings in restaurant and travel companies, has returned 3.9% YTD.

Series overview

With Shake Shack’s third-quarter earnings around the corner, we’ll look at analysts’ revenue and EPS expectations for the quarter. We’ll also cover management’s guidance and analysts’ expectations for 2018. Finally, we’ll end this series by looking at the company’s valuation multiple and analysts’ recommendations. Let’s start by looking at analysts’ revenue expectations for the third quarter.


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