A month has gone by since the last earnings report for Dunkin' Brands Group, Inc. DNKN. Shares have added about 2.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dunkin' Brands Beats on Q1 Earnings, Misses Sales
Dunkin' Brands reported mixed first-quarter 2017 results, wherein the bottom line outpaced the Zacks Consensus Estimate while the top line lagged the same.
Earnings and Revenues Discussion
Adjusted earnings of $0.54 per share beat the Zacks Consensus Estimate of $0.48 by 12.5% and increased 22.7% year over year. This growth was mainly owing to better margins, offset by an increase in shares outstanding.
This quick service restaurant operator’s revenues in the quarter increased 0.5% year over year to $190.7 million. The increase was on the back of a rise in royalty income as well as a boost in franchise fees, partly offset by a decrease in sales at company-operated restaurants. However, revenues missed the Zacks Consensus Estimate of $192.2 million by 0.8% in the reported quarter.
Inside the Headline Numbers
Dunkin' Brands operates through its Dunkin’ Donuts and Baskin-Robbins brands.
The company’s system-wide sales increased 4.6% comparing unfavorably with 12.1% growth in the prior quarter.
Dunkin' Donuts U.S. reported revenues of $142 million, which reflects an increase of 2.3% over the prior-year quarter. The upside was attributable to higher royalty income and rental income as well as an increase in franchise fees, partly offset by a decrease in sales at company-operated restaurants.
Comps remained flat in the Dunkin’ Donuts U.S. division comparing unfavorably with 2% growth in the prior-year quarter and 1.9% growth in the preceding quarter.
But, comps at Dunkin’ Donuts International division declined 0.2% compared with 2.3% decline in the prior-year quarter. The figure compared favorably with the decline of 1% in the preceding quarter.
Baskin-Robbins U.S. revenues were down 0.1% from the prior-year quarter to $10.6 million. The decline was due to a rise in royalty income was mostly offset by decreases in other revenues and franchise fees.
Comps also decreased 2.4% in the Baskin Robbins U.S. division comparably weaker than 5% growth in the year-ago quarter and 0.9% decline in the prior quarter.
At Baskin Robbins International division, comps fell 2.0%, better than the 8.2% slump in the prior-year quarter but weaker than the 0.7% growth in the prior quarter.
Adjusted operating income rose 5.9% from the prior-year quarter to $96.7 million mainly due to the increase in royalty income, partly offset by an increase in general and administrative expenses as well as occupancy expenses. Additionally, the prior-year period was unfavorably impacted by the operating results of company-operated restaurants, which led toward a favorable comparison in the current period. Meanwhile, adjusted operating income margin rose 260 basis points to 50.7%.
In the first quarter, Dunkin' Brands opened 29 net new restaurants worldwide. These include 56 new Dunkin' Donuts U.S. locations, offset by the closure of 27 Dunkin' Donuts international outlets. There was one new opening under the Baskin-Robbins U.S. division, offset by the closure of one Baskin-Robbins International. Additionally, Dunkin' Donuts U.S. franchisees remodeled 81 restaurants, while Baskin-Robbins U.S. franchisees renovated 36 outlets during the quarter.
Guidance for 2017
In the full-year 2017, Dunkin’ Brands now expects adjusted earnings per share in the range of $2.40 to $2.43 (previously expected $2.34–$2.37) and continues to project mid-to-high single-digit growth in adjusted operating income.
The company continues to anticipate low-to-mid single-digit revenue growth. Additionally, it projects low-single-digit comps growth for Dunkin' Donuts U.S. and Baskin-Robbins U.S, in line with previous expectation.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Dunkin' Brands Group, Inc. Price and Consensus
Dunkin' Brands Group, Inc. Price and Consensus | Dunkin' Brands Group, Inc. Quote
At this time, Dunkin' Brands' stock has a subpar score of 'D' on both growth and momentum front. Charting an exact same path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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