Will Shake Shack’s Q4 Earnings Boost Its Stock Price?

Shake Shack (SHAK) is scheduled to post its fourth-quarter earnings results after the market closes on February 25. On February 19, Shake Shack was trading at $52.87, a fall of 3.5% since its announcement of its third-quarter earnings results on November 1.

In the third quarter, Shake Shack posted better-than-expected revenue and adjusted EPS. The company’s management also raised its revenue guidance for 2018. However, the company’s SSSG (same-store sales growth) fell 0.7%, while analysts were expecting it to rise 1.1%. The 4.0% decline in transactions lowered the company’s SSSG during the quarter, which—along with weakness in the broader equity market—led Shake Shack stock to fall to a low of $40.67 on December 26.

However, since then, the company’s stock price has risen 30.0% due to the strengthening of the broader equity market and the optimism surrounding its initiatives to enhance the customer experience through the implementation of digital advancements.

After returning 5.1% in 2018, Shake Shack has started 2019 on a strong note, with its stock price rising 16.4% YTD (year-to-date) as of February 19. During the same period, Chipotle Mexican Grill (CMG) and McDonald’s (MCD) have returned 38.8% and 0.9%, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests ~8.4% of its holdings in restaurant and travel companies, has returned 11.6% YTD.

In this series, with Shake Shack’s fourth-quarter earnings around the corner, we’ll look at analysts’ revenue and EPS expectations for the quarter. We’ll also cover its management’s guidance for 2018. In the end, we’ll look at analysts’ recommendations and the company’s valuation. First, let’s look at analysts’ revenue expectations for SHAK.