What happened

Shares of Zoe's Kitchen Inc (NYSE:ZOES) were surging today after the company reported third-quarter earnings. Though the results were essentially in line with analyst estimates, the stock jumped on what may have been a relief rally as shares had fallen by more than 50% this year before today. The stock also got an upgrade to buy from Jefferies. 

The stock was up 14.4% as of 11:30 a.m. EST.

A steak kebab dish from Zoe's Kitchen

Image source: Zoe's Kitchen.

So what

Zoe's said comparable sales fell 0.5% in the period, but they would have increased 0.4% without the effects of Hurricanes Harvey and Irma. Similarly, the fast-casual chain said revenue increased 15.7% to $77.9 million, but that would have been $79 million adjusting for the hurricanes. Analysts had expected revenue at $78.8 million. 

On the bottom line, adjusted profit fell from a $0.04 per share to breakeven, which matched expectations.

CEO Kevin Miles noted momentum from new menu introductions in the quarter and said the company was continuing to navigate a "challenging environment." He also said the company would reduce its new-store guidance for 2018 by 25 restaurants as the company works to return to consistent profitability.

Jefferies lifted its rating on the stock from a hold to a buy as its sees a strong 2018 with improvement in same-store sales and margins. 

Now what

Looking ahead, the company reduced its full-year guidance as it now calls for revenue of $314 million to $316 million, down from a prior range of $314 million to $320 million. It also sees comparable sales down 2% to 2.5%, compared to a previous range of flat to -3%, and lower restaurant-level operating margins.

Given that, the stock's jump is a bit of surprise, but the analyst upgrade likely helped. Considering the general headwinds in the restaurant industry, I'd be skeptical of Zoe's regaining its losses over the last two years.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoe's Kitchen. The Motley Fool has a disclosure policy.