Analysts’ expectations

For 2019, analysts are expecting Shake Shack (SHAK) to post EPS of $0.60, which implies a fall of 16.2% from $0.71 in 2018. The decline in EBIT margin will likely lower Shake Shack’s EPS in 2019. However, some of the declines are expected to be offset by revenue growth and a lower effective tax rate.

Why Analysts Expect Shake Shack’s EPS to Fall in 2019

For 2019, analysts forecast Shake Shack to post revenue of $577.4 million, which represents a rise of 25.7% from $459.3 million in 2017. The revenue growth will likely be driven by SSSG (same-store sales growth), which is expected to be in the range of 0% to 1%, and new restaurant openings. The company’s management plans to open 36–40 company-owned restaurants and 16–18 franchised restaurants during the period.

Shake Shack is focusing on the introduction of new menu items, enhancing customers’ experience through the implementation of digital advancements, and automating its administrative process through “Project Concrete” to allow employees to focus on customers’ experience to drive its SSSG.

The company’s EBIT margin is expected to fall from 7.7% in 2018 to 5.1%. The lower restaurant-level operating profit margin, higher G&A (general and administrative) expenses, an increase in pre-opening costs due to the higher number of restaurant openings, and higher depreciation expenses are expected to lower the company’s EBIT margin. Analysts are expecting Chipotle’s effective tax rate for 2019 to be at 28.1% compared to 29.4% in 2018.

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