Noodles & Company Q3 Earnings: Is A Beat in Store?

Noodles & Company NDLS is scheduled to report third-quarter 2017 numbers on Nov 9, after market close.

Various sales building initiatives undertaken by the company such as streamlining of menu and its innovation, introduction of new cooking procedures, effective marketing strategy, increased focus on the off-premise business along with investments in technology-driven initiatives like digital ordering are expected to boost the quarter's results. Moreover, efforts to simplify operations are likely to improve execution and result in increased guest satisfaction and labor productivity.

In first-quarter 2017, Noodles & Company completed the closure of 55 underperforming restaurants that had been consistently hampering its human and financial capital. Consequently, third-quarter margins are likely to gain from this closure as was the case in the second quarter.

The Zacks Consensus Estimate for the quarter's earnings is pegged at 2 cents per share comparing much favorably with a loss of 4 cents incurred in the year-ago quarter.

Our proven model also shows that Noodles & Company has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat in this quarter. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is pegged at +66.67%. This is a major indicator of a likely positive earnings surprise.

Zacks Rank: Noodles & Company's Zacks Rank #3 when combined with a positive ESP makes us reasonably confident of an earnings beat.

Noodles & Company Price and EPS Surprise

Noodles & Company Price and EPS Surprise | Noodles & Company Quote

Meanwhile, in mid-July the company launched its NoodlesREWARDS Program that is expected to boost traffic by growing the loyal guest base. It is also likely to ease the online ordering process.

However, a soft consumer spending environment in the U.S. restaurants space might continue to hurt traffic and thereby comps in the to-be-reported quarter. In fact, per the second-quarter conference call, management anticipates low-to-mid single-digit negative company-owned comparable restaurant sales for the second half of 2017. Meanwhile, system-wide comps have been declining over the past few quarters. Per the Zacks Consensus Estimate, the same are expected to decline 2.5% year over year.

Notably, the consensus estimate projects a year-over-year decrease of 6.4% in the company's sales to $114.9 million in the third quarter.

Also, this fast-casual restaurant chain's margins are expected to be under pressure due to higher costs as well as expenses related to the implementation of strategic initiatives.

Of late, the company implemented a revised pricing structure, which incorporates about 2% of price increase and aids in better understanding of the menu. It remains to be seen what impact this step has on traffic and sales in the quarter.

Stocks That Warrant a Look

Here are some other stocks that you may want to consider as these have the right combination of elements to post earnings beat this quarter too.

Performance Food Group Company PFGC has an Earnings ESP of +3.85% and a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

DineEquity Inc. DIN has an Earnings ESP of +5.14% and a Zacks Rank #3.

The Wendy's Company WEN has an Earnings ESP of +3.71% and a Zacks Rank #3.

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