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



Analysts’ estimates

For 2019, analysts expect Shake Shack (SHAK) to post adjusted EPS of $0.57, which represents a fall of 19.7% from $0.71 in 2018. A contraction in its EBIT margin and a higher effective tax rate are expected to lower the company’s EPS in 2019. However, some of the fall is expected to be offset by revenue growth.

Analysts expect Shake Shack’s EBIT margin to contract from 7.7% in 2018 to 4.8% in 2019. A higher cost of goods sold, increased SG&A (selling, general, and administrative) expenses, and higher depreciation and amortization costs are likely to cause the company’s EBIT margin to contract.

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In 2019, the company’s cost of goods sold is likely to rise due to increased commodity prices and higher packaging costs. Shake Shack has been investing in long-term growth initiatives (such as Project Concrete) and the implementation of digital advancements to enhance the customer experience. These initiatives, along with higher labor expenses, are expected to raise SHAK’s SG&A expenses in 2019.

For 2019, Shake Shack’s management expects its effective tax rate to be in the range of 26.5%–27.5%. Analysts expect the company’s effective tax rate for 2019 to be 26.7% compared to 22.2% in 2018.

Peer comparison

In 2019, Chipotle Mexican Grill (CMG) and McDonald’s (MCD) are expected to post EPS rises of 44.1% and 1.8%, respectively.


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