First Watch to Report Q4 Earnings: What's in the Cards?

Zacks03-06

First Watch Restaurant Group, Inc. FWRG is scheduled to release fourth-quarter fiscal 2024 results on March 11, before the opening bell.

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In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 40%.

How are Estimates Placed for FWRG?

The Zacks Consensus Estimate for fiscal fourth-quarter earnings per share (EPS) is pegged at 2 cents, indicating a decrease of 50% from 4 cents reported a year ago. In the past 60 days, estimates for the company’s earnings have been stable.

For revenues, the consensus mark is pegged at $262.2 million, implying growth of 7.2% from the year-ago quarter’s figure.

First Watch Restaurant Group, Inc. Price and EPS Surprise

First Watch Restaurant Group, Inc. price-eps-surprise | First Watch Restaurant Group, Inc. Quote

Let us analyze the factors that might have impacted the company’s performance in the quarter to be reported.

Factors Likely to Shape FWRG’s Q4 Results

First Watch Restaurant’s fiscal fourth-quarter top line is expected to have increased year over year, driven by new restaurant openings and an increased focus on strategic franchise acquisitions. The company is expected to have opened 23 new restaurants in the fiscal fourth quarter, with plans to expand the system more than 10% annually.

Also, a focus on a modest pricing strategy, targeted marketing efforts and technology investments are likely to have aided the company’s performance in the to-be-reported quarter. The Zacks Consensus Estimates for restaurant sales in the fiscal fourth quarter is pegged at $259 million, up from $241 million reported in the prior-year quarter.

However, a decline in same-restaurant sales, along with lower traffic, is expected to have weighed on overall performance. These factors are likely to have impacted the company’s top line. The company’s preliminary results for the fourth quarter of fiscal 2024 revealed a 0.3% decrease in same-restaurant sales compared with the previous year's level. Also, there was a 3% decline in same-restaurant traffic during the fiscal fourth quarter.

The consensus estimates for franchise revenues in the fiscal fourth quarter is pegged at $2.8 million, down from $3.6 million reported in the prior-year quarter.

Meanwhile, higher general and administrative expenses, along with labor cost inflation, are likely to have negatively impacted the bottom line in the to-be-reported quarter. However, the company's focus on solid operational execution, cost management and labor efficiency is expected to have partially offset these challenges.

What Our Model Says About FWRG

Our proven model does not predict an earnings beat for First Watch this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Earnings ESP of FWRG: First Watch has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

FWRG’s Zacks Rank: First Watch has a Zacks Rank #3.

Stocks Poised to Beat Earnings Estimates

Here are some companies in the Zacks Retail-Wholesale sector which, according to our model, have the right combination of elements to post an earnings beat.

CAVA Group, Inc. CAVA has an Earnings ESP of +0.17% and a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

CAVA is expected to register a 16.7% year-over-year increase in earnings for the to-be-reported quarter. It reported better-than-expected earnings in the trailing three out of four quarters and missed once, the average surprise being 62.6%.

Domino's Pizza, Inc. DPZ currently has an Earnings ESP of +0.04% and a Zacks Rank of 3.

DPZ reported an earnings beat in the trailing three out of four quarters and missed once, the average surprise being 6.8%. Its earnings for the to-be-reported quarter are expected to increase 11.5% year over year.

Yum! Brands, Inc. YUM currently has an Earnings ESP of +0.73% and a Zacks Rank of 3.

YUM’s earnings for the to-be-reported quarter are expected to grow 10.4% year over year. Its earnings topped the consensus mark in two of the trailing four quarters and missed on two occasions, with a negative average surprise of 0.7%.

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This article originally published on Zacks Investment Research (zacks.com).

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