U.S. Markets closed

What Awaits Dunkin' Brands (DNKN) this Earnings Season?

Zacks Equity Research

Dunkin' Brands Group, Inc. DNKN is scheduled to report first-quarter 2017 numbers on May 4, before the opening bell.

Last quarter, Dunkin' Brands posted a 6.67% positive earnings surprise. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 3.56%.

Let’s see how things are shaping up for this announcement.

Dunkin' Brands Group, Inc. Price and EPS Surprise


Dunkin' Brands Group, Inc. Price and EPS Surprise | Dunkin' Brands Group, Inc. Quote

Factors Likely to Influence Q1 Results

Dunkin' Brands operates through the Dunkin' Donuts and Baskin-Robbins brands. Various sales and digital initiatives undertaken by the company such as faster and improved product innovation, targeted values and smart pricing, improving the restaurant-like experience, breakfast menu optimization, the loyalty program and mobile ordering service are expected to boost the quarter’s results.

Moreover, increased focus on establishing itself as a beverage leader provides the company with a great growth opportunity. In keeping with this strategy, the company’s Dunkin’ Donuts, division launched ready-to-drink bottled iced coffee in Feb 2017, which could enhance its top line in the to-be-reported quarter. Meanwhile, we anticipate Dunkin' Brands robust unit expansion plans to further drive revenues.

Nevertheless, like other restaurant chains, Dunkin' Brands' upcoming results are likely to be hurt by high labor expenses. Also, the Breakfast segment, which is historically one of the company’s most profitable divisions, is facing immense competition with more companies grabbing the market share. It should be noted that this could continue to hurt the company’s top line.

Meanwhile, challenging comps growth in international markets at both its divisions is likely to hamper revenue growth in the first quarter. Also, a downward trend in the U.S. restaurant space might hurt traffic and in turn comps in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Dunkin' Brands this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Dunkin' Brands has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 48 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Dunkin' Brands has a Zacks Rank #4 (Sell).

Notably, we caution you against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Jack in the Box Inc. JACK has an Earnings ESP of +4.40% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wingstop Inc. WING has an Earnings ESP of +6.67% and a Zacks Rank #3.

The Priceline Group Inc. PCLN has an Earnings ESP of +2.06% and a Zacks Rank #3.

5 Trades Could Profit ""Big-League"" from Trump Policies

If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.

Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Priceline Group Inc. (PCLN): Free Stock Analysis Report
Jack In The Box Inc. (JACK): Free Stock Analysis Report
Dunkin' Brands Group, Inc. (DNKN): Free Stock Analysis Report
Wingstop Inc. (WING): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research