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Dunkin' Brands (DNKN) Q1 Earnings & Revenues Beat Estimates

Zacks Equity Research

Dunkin' Brands Group, Inc. DNKN reported better-than-expected results for the first quarter of 2019. Notably, the reported quarter marked the sixth straight quarter of an earnings beat.

Adjusted earnings of 67 cents per share surpassed the consensus estimate of 62 cents by 8.1%. The bottom line also improved 8.1% on a year-over-year basis, driven by rise in net income and fall in shares outstanding.

Revenues were up 5.9% year over year to $319.1 million andsurpassed the consensus mark of $313 million. The top line improved, primarily owing to rise in royalty income from system-wide sales growth, and an increase in advertising fees and related income.

The company’s global system-wide sales rose 4.1% from the prior-year quarter. System-wide sales were favored by global store development.

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


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

Segmental Performance

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

Dunkin' U.S. reported revenues of $149.7 million, which reflect an increase of 7% from the prior-year quarter. Thisupside can be attributed to higher royalty income, driven by system-wide sales growth and increase in rental income, offset by a decrease in franchise fees Comps also increased 2.4% in the first quarter of 2019, owing to an increase in average ticket, which was partially offset by a decrease in traffic.

Dunkin’ International division reported revenues of $6.9 million, mirroring an increase of 27.7% from the prior-year quarter. The improvement was primarily backed by rise in royalty income and franchise fees. Additionally, comps increased 2.9% compared with 2.1% gain in the year-ago quarter.

Baskin-Robbins U.S. revenues declined 2.2% from the prior-year quarter to $10.3 million due to decreases in royalty income, driven by a system-wide sales decline, as well as a decrease in other revenues, offset by an increase in rental income.  Comps fell 2.8% compared with1% fallrecorded in the year-ago quarter.

Baskin-Robbins International division revenues were $25.6 million, marking a year-over-year decrease of 1.2% due to a declinein sales of ice cream and other products, offset by increases in royalty income, franchise fees and rental income.Also, comp decline was 2% against rise of 10% in the year-ago quarter.

Operating Performance

Adjusted operating income rose 11.1% from the year-ago quarter to $106.3 million, mainly owing to increase in royalty income, and a reduction in general and administrative expenses due primarily to a decrease in personnel costs. Adjusted operating income margin expanded 150 basis points to 33.3%.

Balance Sheet

Dunkin' Brands exited the first quarter of 2019 with cash and cash equivalents of $458.7 million compared with $517.6 million at the end of 2018. Restricted cash totaled $79.6 million, up from $79 million as of Dec 29, 2018. Long-term debt was approximately $3 billion.

2019 Guidance

Dunkin’ Brands still expects adjusted earnings of $2.94-$2.99 per share. The Zacks Consensus Estimate for earnings in 2019 is pegged at $2.98, well above the mid-point of the company’s guided range. Moreover, operating and adjusted operating income growth is anticipated in a mid to high-single digit.

The company expects low to mid-single-digit revenue growth, with Dunkin’ U.S. and Baskin-Robbins U.S’ comps improving in a low-single digit. It expects to open at the low end of 200-250 net new Dunkin' U.S. units.

Zacks Rank & Stocks to Consider

Dunkin’ Brands currently 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 third-quarter fiscal 2019 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of $1.80 per share beat the Zacks Consensus Estimate of $1.75. Moreover, the bottom line increased 5.3% year over year on the back of higher revenues.

Chipotle CMG reported better-than-expected results in the first quarter of 2019. Adjusted earnings of $3.40 per share surpassed the Zacks Consensus Estimate of $3.01 by 13%. The bottom line also grew 59.6% from the year-ago quarter, backed by increased revenues and lower food costs.

Domino’s DPZ reported mixed first-quarter 2019 financial numbers, wherein earnings outpaced the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $2.20 per share surpassed the Zacks Consensus Estimate of $2.07 and increased 10% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.

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