Shake Shack Q2 Earnings: Blame the Weather?

Small cap New York City based burger stock Shake Shack Inc (NYSE: SHAK) reportedQ2 2017 earnings after the market closed Thursday. Before earnings were reported, Barrons noted thatthere were twice as many rainy days in the Northeast (where most of Shake Shacks locations are) as there were a year ago and more than half of the burger chains restaurants in New York have outdoor seating.

Total revenue increased 37.4% to $91.3 million as Shack sales increased 36.6% to $88.0 million (due primarily to the opening of 24 new domestic company-operated Shacks, partially offset by same-Shack sales decline of $0.9 million) and Same-Shack sales decreased 1.8% versus 4.3% growth in the second quarter last year. Net income increased 25.0% to $8.2 million and net income attributable to Shake Shack was $4.9 million versus $3.3 million. The CEO commented:

The team posted another strong quarter of growth on both the top and bottom line, increasing total revenue over 37% and adjusted EBITDA over 36%. We added seven net new system-wide Shacks in both new and current markets, continuing the growth of our licensed business at home and abroad.Shacks outside of our comp base represented $24.5 million in increased revenue partially offset by a decline in same-Shack sales, but sequentially improved from last quarter. Even considering the same-Shack sales decline, coming from our small base of 37 Shacks, were reiterating our revenue growth targets for the year, our development schedule and the strength of our Shack-level operating profit. Were incredibly excited about the recently announced agreement we executed to open Shake Shacks in Hong Kong and Macau, as we build on the strength of our Asian business with an eye towards China and further development through the region. Were also proud of the technology, personalized marketing and menu innovation initiatives weve launched to date and, as we look to the future, were focused on investing in these key areas and the tremendous growth ahead of us.”

Shake Shackdid have asizzling IPO back in January 2015, but there was also talk ofpeak burger given the Habit Restaurants Inc (NASDAQ: HABT) IPO around the same time and the presence of other more established burger stocks.

A technical chart for Shake Shack shows shares repeatedly hitting a resistance level at the $39 level:

A long term performance chart shows shares of newcomers Shake Shack and California based IPO Habit Restaurants both underperforming whilemore established small capburger stocks likeRed Robin Gourmet Burgers, Inc (NASDAQ: RRGB) and Sonic Corporation (NASDAQ: SONC) were big outperformers, but have been drifting lower in recent years:

Finally, here is a quick recap of small cap Shake Shacks recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

Earnings History6/29/20169/29/201612/30/20163/30/2017
EPS Est. 0.13 0.14 0.09 0.08
EPS Actual 0.14 0.15 0.09 0.1
Difference 0.01 0.01 N/A 0.02
Surprise % 7.70% 7.10% N/A 25.00%
EPS TrendCurrent Qtr. (Jun 2017)Next Qtr. (Sep 2017)Current Year (2017)Next Year (2018)
Current Estimate 0.16 0.17 0.5 0.61
7 Days Ago 0.16 0.17 0.5 0.61
30 Days Ago 0.16 0.17 0.5 0.61
60 Days Ago 0.16 0.17 0.5 0.61
90 Days Ago 0.17 0.17 0.5 0.63

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