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Dunkin' Brands (DNKN) Q1 Earnings Beat, Hikes '18 EPS View

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Dunkin' Brands Group, Inc. DNKN reported decent results for the first quarter of 2018, wherein earnings surpassed the Zacks Consensus Estimate while revenues came almost in line with the same.

Adjusted Earnings of 62 cents per share surpassed the consensus estimate of 52 cents by 19.2%. The bottom line also increased 21.6% year over year. The upside can be attributed to a reduction in income tax expenses and rise in operating income along with a decrease in shares outstanding from repurchase of shares since the first quarter of 2017.

Revenues in the first quarter increased 1.7% year-over-year to $301.3 million, almost in line with the consensus estimate of $301.4 million. The top line increased primarily due to increased royalty income from system-wide sales growth and an increase in advertising fees, partially offset by a decrease in sales of ice cream and a few other products.

The company’s global system-wide sales increased 5.1% from the prior-year quarter and compared favorably with 2.8% growth in the fourth quarter of 2017. System-wide sales were favored by global store development and Baskin-Robbins International comps growth.

Dunkin' Brands Group, Inc. Price, Consensus and EPS Surprise

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

There was no stock movement in afterhours trading. Notably, its shares have returned 11% over the past year, outperforming the industry’s 4.6% rally.

Let’s delve deeper into the numbers.

Segmental Performance

Dunkin' Brands operates through its Dunkin’ Donuts and Baskin-Robbins brands.

Dunkin' Donuts U.S. reported revenues of $139.9 million, which reflects an increase of 2.8% from the prior-year quarter. The upside can be attributable to higher royalty income and franchise fees, partly offset by decline in other revenues. Comps declined 0.5% in the quarter due to a fall in traffic.

Dunkin’ Donuts International division reported revenues of $5.4 million, reflected an increase of 11% from the prior-year quarter. Comps increased 2.1% against a decline of 0.2% in the prior-year quarter.

Baskin-Robbins U.S. revenues were down 0.6% from the prior-year quarter to $10.5 million due to a decrease in royalty income, offset by an increase in sales of ice cream and other products. Comps dipped 1% compared with 2.4% decline in the year-ago quarter.

Baskin-Robbins International division revenues were down 1.5% from the prior-year quarter to $25.8 million. The downtrend was mainly due to decline in sales of ice cream products. Comps improved 10% against a 2% decline in the prior-year quarter.

Operating Performance

Adjusted operating income rose 3.9% from the year-ago quarter to $95.7 million mainly owing to an increase in royalty income and a reduction of general and administrative expenses. The upside was partly offset by a decrease in net income from the South Korea joint venture, a decrease in net margin on ice cream primarily due to an increase in commodity costs, and a gain recognized in connection with the sale of real estate in the prior-year period. Adjusted operating income margin was up 70 basis points to 31.8%.

Balance Sheet

Dunkin' Brands exited the first quarter with cash and cash equivalents of $338.5 million, compared with $1 billion at the end of 2017. Restricted cash was $82.6 million, down from $94 million in the previous year. Accounts receivables were $106.3 million, down from $121.8 million in the prior year. Long-term debt was approximately $3 billion.

2018 Guidance

Dunkin’ Brands expects adjusted earnings in the range of $2.69 to $2.74 per share (up from the previously guided range of $2.40 to $2.45 EPS. The Zacks Consensus Estimate for earnings in 2018 is pegged at $2.65.

The company expects low-to-mid single digit revenue growth, with Dunkin’ Donuts U.S. comps improving 1%. Operating and adjusted operating income growth is expected in mid to high-single digit.

Zacks Rank & Peer Releases

Dunkin’ Brands carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Darden DRI reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of higher revenues.

Restaurant Brands’ QSR first-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, growing 86.1% year over year.

Chipotle’s CMG first-quarter 2018 earnings surpassed analysts’ expectations while revenues were in line with the same. Adjusted earnings of $2.13 grew 33.1% from the year-ago quarter driven by higher revenues and lower food costs.

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