Photo Credit: Lucas Richarz

Shake Shack Inc (SHAK) Consumer Discretionary - Hotels, Restaurants & Leisure | Reports May 11, Before Market Opens

Key Takeaways

• The Estimize consensus is calling for earnings per share of 7 cents on $53 million in revenue, 1 cent higher than Wall Street on the bottom line and right in line on top
• In the last 4 quarters, SHAK has posted an average EPS surprise of 162%, and YoY growth of 200 - 900%
• Shake Shack continues to attract new customers and increase traffic with new menu items such as the Chick’N Shack
• What are you expecting for SHAK? Get your estimate in here!

Shake Shack’s cult following and successful expansion hasn’t been enough to save its stock. The burger joint has suffered a similar fate as many new public companies. Robust earnings and growth just aren’t enough investors who want more. Shares are now down over 50% after hitting its peak of $92 at the end of May 2015. This quarter, earnings are expected to come in strong as usual, but slower than previous quarters. It may also be the first time that Shake Shack fails to break 100% growth on the bottom line.

The Estimize consensus is calling for earnings per share of 7 cents on $53 million in revenue, 1 cent higher than Wall Street on the bottom line and right in line on top. Compared to a year earlier earnings are predicted to grow 85% with sales climbing 40%. On average, the stock is a positive mover leading up to earnings but then turns negative after earnings likely due to weak forward guidance. 

In the last 4 quarters, SHAK has posted an average EPS surprise of 162%, and YoY growth of 200 - 900%. Revenue growth was also impressive in 2015, increasing 47%+ each quarter. Arguably the more important metric for this company is same shack sales, which increased 11% in Q4, and 13.3% in 2015. The outlook for 2016 isn’t as impressive, with the company guiding for same shack sales between 2.5 and 3.0%.

First quarter 2016 expectations look less rosy due to increased labor costs and beef prices. Meanwhile consumer preferences and spending habits are shifting back to the fast food industry. Quick-serve restaurants, like McDonald’s and Wendy’s, are quickly adopting the values and practices that made Shake Shack so successful. This will inevitably be a source of concern moving forward. Additionally, Shake Shack has been unable to live up to its astonishing valuation and as growth slows down, share should take a beating.

Still, Shake Shack has a very loyal customer base which has only increased in recent years. The company continues to attract new customers with frequent menu updates such as the Chick’N Shack. The new sandwich has come with rave reviews as a limited time offer that they decided to add it as a permanent menu item. Shake Shack also continues with it’s aggressive expansion plan, with 13 domestic stores set to open this year, and 7 licensed Shacks scheduled to open in the U.K. Middle East and Japan.