That's why Benchmark downgrades BJ's Restaurants stock despite Q2 beat by Investing.com
On Friday, BJ's Restaurants (NASDAQ:) had a change in the stock rating as analyst Benchmark removed the rating from Buy to Hold. The decision came after the company reported its results for the second quarter of the 2024 fiscal year, which showed a slight increase in the expectations of the deal.
The restaurant recorded revenue of $350 million, which was $1 million above the consensus estimate. This revenue was reported despite a slight decline in same store sales (SSS) of 0.6%. Additionally, adjusted earnings per share (EPS) came in at $0.53, compared to the consensus forecast of $0.51.
The company's adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) also beat expectations, reaching $36 million against consensus of $33 million.
Despite positive results in revenue, EPS, and EBITDA, the decline reflects a cautious approach toward the coming fiscal years for BJ's Restaurants. The analyst cited very tight estimates for fiscal years 2024 and 2025 as the main reason for the change in rating. In addition, downsizing is influenced by the challenges posed by the current operating environment, which is described as difficult in the near term.
BJ's restaurants' second-quarter performance, adjusted for certain below-the-line items, including a $0.19 adjustment, managed to slightly beat market expectations. The company's ability to achieve these results amid a slight decline in same-store sales suggests a strong operating strategy.
Investors and stakeholders of BJ's restaurants are now aware of how the company will cope with the projected conservative financial position and operational difficulties highlighted by the analyst report.
A change from a Buy rating to a Hold indicates a shift to Neutral on the company's stock, suggesting that the analyst currently does not see a significant upside potential in the near term.
In other recent news, BJ's Restaurants Inc. reported a modest decline in comparable sales but a significant increase in restaurant margins and adjusted EBITDA for the second quarter of fiscal 2024. Despite a 0.6% decline in comparable sales, the company's total sales reached $349.9 million. . This is reflected in BJ's Restaurants' focus on improving the guest experience and efficiency benefits, as well as the share buyback program.
Restaurant margin improved to 15.5%, marking a year-over-year increase of 100 basis points. Adjusted EBITDA also saw an increase of 13% to $36.1 million. The company announced plans to open two new restaurants with a new brand and has repurchased approximately 255,000 shares of common stock for $8.8 million.
Looking ahead, BJ's Restaurants projects Q3 comparable sales to be 1% to 2%. Despite the expected increase in marketing and food costs, the company expects margin expansion in Q4. The company's outlook includes a target of 8-10% top-line sales growth in new units and low- to mid-single-digit comparable restaurant sales.
InvestingPro Insights
Following the recent analyst rating change for BJ's Restaurants (NASDAQ:BJRI), it is wise to take a look at some key metrics and tips provided by InvestingPro. The company has been trading at multiple earnings with a P/E Ratio of 36.63, suggesting that investors have high expectations for future earnings growth. However, this valuation becomes more attractive when considering the adjusted P/E ratio for the last twelve months as of Q1 2024, which stands at a low of 29.64. This may indicate that the company is likely to be undervalued relative to its near-term earnings growth, something that may interest profit-oriented investors.
In addition, BJ's Restaurants has demonstrated a commitment to returning value to shareholders by increasing its dividend for 3 consecutive years, a sign of confidence in its financial health and future prospects. Despite the challenges in the workplace, InvestingPro Tips also points out that analysts are predicting that the company will be profitable this year, which is in line with the company's profitability in the last twelve months. The company's strength is also highlighted by its 0.21% profit growth in the last twelve months from Q1 2024, which shows its ability to grow despite the market.
For those looking to delve deeper into BJ's Restaurants' financials and future outlook, InvestingPro offers additional tips that can help make a more informed investment decision. There are 10 more InvestingPro tips available, which can be accessed by visiting To improve your investment strategy, use the coupon code. PRONEWS24 for up to 10% off annual Pro and annual or bi-annual Pro+ subscriptions.
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