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Strength Seen in Noodles & Co. (NDLS): Can Its 6.3% Jump Turn into More Strength?

Noodles & Co. (NDLS) witnessed a jump in share price last session on above-average trading volume. The latest trend in earnings estimate revisions for the stock doesn't suggest further strength...

This story originally appeared on Zacks

Noodles & Co. (NDLS) shares ended the last trading session 6.3% higher at $8.74. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 20.4% loss over the past four weeks.

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Shares of Noodles & Company appreciated after the company announced Warner Foods as its new exclusive franchise partner for the state of California. The deal is expected to close on Jan 12. Warner Foods already operates more than 150 Jack in the Box, Black Bear Diner, and Panera Bread restaurants.

Per the agreement, Warner Foods will operate as NorCal Noodles, LLC (NorCal Noodles) and will develop 40 new Noodles & Company locations throughout the state. The deal includes re-franchising of all 15 current company-owned Noodles & Company locations in California to NorCal Noodles.

This restaurant chain is expected to post quarterly earnings of $0.08 per share in its upcoming report, which represents a year-over-year change of +300%. Revenues are expected to be $120.84 million, up 12.8% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Noodles & Co., the consensus EPS estimate for the quarter has been revised 50% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on NDLS going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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