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Summary

  • Earnings beat consensus by a large margin.
  • This was right in line with what we expected from BJ’s new menu and expansion efforts.
  • We expect BJ to continue outperforming peers when it comes to traffic as it moves toward new initiatives, such as mobile ordering and payments.

Last Thursday, BJ's Restaurants (NASDAQ:BJRI) crushed earnings, beating by 25%. EPS came in at $0.30 (versus $0.24 consensus) on revenues of $219 million. Shares are up nearly 11% since earnings. The earnings beat came as revenues were up 10.5% y/y, which was driven by menu innovation. We covered BJ's back in March, and since then shares are only up 3%. Shares still trade at a hefty discount to our $43.50 price target.

BJ's pointed to new menu items (such as Kale and Mediterranean Chicken Pita Tacos) as helping drive more interest in the chain. We believe this is a big part of the long-thesis for BJ's stock; innovation. The other part is expansion, where the company noted that its 2014 expansion plans remain on track. It's looking to open 6 stores in the second half of this year. We're also encouraged by the move toward allowing diners to pay via smartphones.

As we noted back in March:

...BJ's is investing in its food quality and menu. Changing lifestyles also means that BJ's must change. The move toward healthier and low-calorie fare is very real, and BJ's has taken notice...BJ's is looking to offer healthier meals at lower-price points. Just a few items includes its $9.50 Kale and Brussels Sprouts Salad and $8.95 Mediterranean Chicken Pita Tacos...

And,

The move toward mobile and tablets should also help with table turns, potentially moving the average ticket time from an hour to forty minutes -- ultimately increasing traffic. This comes as BJ's hasn't been known for its speed.

Source: Update: BJ's Restaurants Earnings