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Will Shake Shack's (SHAK) Spectacular 2019 Continue with Q3 Report?

Christopher Vargas

Shake Shack SHAK is on deck to report its third quarter results on Monday, November 4, after the closing bell. The coveted burger joint has seen its shares rise over 80% in 2019 thus far, easily outperforming the restaurant retail market.

Shake Shack’s humble beginnings as a lone food stand in Madison Square Park to where it is now reflects the company’s remarkable ability to grow. Investors are continually impressed with the massive amount of traffic the company’s stores see and the rate of expansion the business is operating at. Let’s take a closer look at the burger company and where they might be headed in the near future.

Sensational Growth

The ‘better burger’ joint has been able to post impressive financial figures that rekindled Wall Street’s infatuation with the company. Shake Shack’s expansion in store presence has stoked investors as the restaurant chain expands its relatively small footprint. Americans are eating out at a high rate which has helped bolster take out companies sales, especially ‘better burger’ options like Shake Shack.

Shake Shack has also benefitted from the food delivery wars between Uber Eats UBER GrubHub GRUB, and other third party delivery platforms. The company wasn’t always producing the results that have captivated Wall Street. Comparable sales fell in some quarters, and doubts rose about the company, prompting a long slide after its 2015 IPO. The stock became heavily shorted, as even at its low point it still carried a high valuation. The food delivery wars helped Shake Shack get out of the slump as it saw a 3.6% comparable-sales growth on a 1.3% increase in traffic in Q2.

Shake Shack’s CEO, Randy Garutti, stated “Our digital channels, including delivery, were a key contributor to these results." The CEO also announced that Shake Shack would be partnering with GrubHub to further the company’s transition into its digital channel and reach a larger market.

Outlook

The company’s partnership with GrubHub should be a potentially lucrative one as its presence in the third party platforms have helped Shake Shack rejuvenate its financial figures. Shake Shack is typically located in densely populated cities that lend themselves to delivery as it adds efficiencies for services trying to deliver many orders in as little time as possible. The convenience of having your lunch-time order delivered to you instead of waiting in a long line during the lunch rush has driven Shake Shack’s performance.

Our Q3 consensus estimates project Shake Shack’s bottom-line to see a 4.76% decline to $0.20 per share and for sales to climb 31.06% to $156.8 million. System wide sales are forecasted to grow 20.4% to $213.2 million and shack sales are predicted to surge 30.7% to $151.4 million. Licensing revenue is estimated to reach $4.3 million for a 14.06% gain from the year ago quarter. Looking ahead the company’s fiscal 2019 figures, earnings are projected to slip 8.45% to $0.65 per share and sales are predicted to rally 30.35% to $598.69 million.

Takeaway

Shak Shack has been on a roll lately as its digital presence has helped the company refurbish its business to reach a wider audience in an efficient manner. The delivery wars have helped Shake Shack boost its business and its new partnership with GrubHub should sustain the strong performance for the foreseeable future. The company’s new restaurant additions will be an important metric that Wall Street will be closely monitoring. Shake Shack sits at a Zacks Rank #3 (Hold).

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