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Dunkin' Brands (DNKN) Beats Q4 Earnings, Hikes Dividend

Zacks Equity Research

Dunkin' Brands Group, Inc. DNKN reported strong fourth-quarter 2016 results, wherein both the bottom and the top lines outpaced the respective Zacks Consensus Estimates.

Earnings and Revenues Discussion

Adjusted earnings of 64 cents per share beat the Zacks Consensus Estimate of 60 cents by 6.7% and increased 23.1% year over year. This growth was mainly due to a decrease in shares outstanding and better margins.
 
The quick service restaurant operator’s revenues in the quarter increased 5.8% year over year to $215.7 million. Primary reasons for the rise were increased royalty income as well as an increase in franchise fees, partly offset by a decrease in sales at company-operated restaurants. Revenues also  outpaced the Zacks Consensus Estimate of $214.7 million by 0.5%.
 

Inside the Headline Numbers

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

System-wide sales increased 12.1%, comparing favorably with 6.3% growth in the prior quarter.

Dunkin’ Donuts

Dunkin' Donuts U.S. reported revenues of $163.1 million, which reflects an increase of 6.5% over the prior-year quarter. The increase was mainly attributable to higher royalty income as well as an increase in franchise fees, partly offset by a decrease in sales at company-operated restaurants.

Comps increased 1.9% in the Dunkin Donuts U.S. division, comparing favorably with 0.8% decline in the prior-year quarter, but slightly unfavorably with the 2% growth in the preceding quarter.

Comps at Dunkin’ Donuts International division declined 1.0%, as against 0.8% decline in the prior-year quarter. The figure compared favorably with a decline of 1.4% in the preceding quarter.

Baskin Robbins

Baskin-Robbins U.S. revenues were up 3.7% from the prior-year quarter to $9.4 million, mainly due to rise in licensing income as well as royalty income, partly offset by a decrease in sales of ice cream and other products.

Comps decreased 0.9% in the Baskin Robbins U.S. division, comparably weaker than 4.4% growth in the year-ago quarter, but similar to the 0.9% decline recorded in the prior quarter.

However, at Baskin Robbins International division, comps grew 0.7%, better than the 2.7% slump in the prior-year quarter and the 2.9% fall in the prior quarter.

Operating Margin

Adjusted operating income rose 14.8% from the prior-year quarter to $119.3 million mainly due to the increase in royalty income and franchise fees, as well as gains from company-operated restaurants, partly offset by an increase in general and administrative expenses. Meanwhile, adjusted operating income margin rose 430 basis points to 55.3%.

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

 

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

Store Update

In the fourth quarter, Dunkin' Brands opened 296 new restaurants worldwide. These include 199 Dunkin' Donuts U.S. locations and 51 Dunkin' Donuts international outlets. There were 41 new openings under Baskin-Robbins International and five under Baskin-Robbins U.S. division. Additionally, Dunkin' Donuts U.S. franchisees remodeled 151 restaurants, while Baskin-Robbins U.S. franchisees renovated 63 outlets during the quarter.

Dividend Hike

The company announced that the board of directors declared a quarterly cash dividend of 32.25 cents. This signifies a 7.5% increase over the prior quarter's dividend.

The dividend is payable on March 22, 2017, to shareholders of record as of the close of business on March 13, 2017.

Full Year 2016 Results

For full-year 2016, the company reported adjusted earnings per share of $2.26, which surpassed the Zacks Consensus Estimate of $2.22 by 1.8%. Further, earnings increased 17.1% over the 2015 figure.

Revenues for the full year were $828.9 million, an increase of 2.2% year over year. Further, revenues outpaced the Zacks Consensus Estimate of $827.4 million by 0.2%.

Guidance for 2017

For full-year 2017, Dunkin’ Brands expects adjusted earnings per share in the range of $2.34–$2.37 and mid-to-high single digit growth in adjusted operating income.

The company projects low-to-mid single digit revenue growth. It also projects low-single-digit comps growth for Dunkin' Donuts U.S. and Baskin-Robbins U.S.

Zacks Rank and Stocks to Consider

Currently, Dunkin’ carries a Zacks Rank #3 (Hold). Here are some better-ranked stocks in the Retail-Restaurants space:

Dave & Buster’s Entertainment, Inc.’s PLAY is a Zacks Rank #1 (Strong Buy) company. Its earnings have surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 37.81%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wingstop, Inc. WING also sports a Zacks Rank #1. It posted positive earnings surprises in all of the last four quarters, with an average beat of 11.99%.

Papa John’s International, Inc. PZZA is a Zacks Rank #2 (Buy) company. It has seen current quarter estimates rise over 3% in the last 60 days.

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