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Dunkin' Brands (DNKN) Q4 Earnings: Disappointment in Store?

Zacks Equity Research

Dunkin' Brands Group, Inc. DNKN is set to report fourth-quarter and full-year 2016 results on Feb 9, before the market opens.

Last quarter, the company posted a positive earnings surprise of 3.45%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 2.89%.

Dunkin' Brands Group, Inc. Price and EPS Surprise

 

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

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

Factors to Consider

Dunkin' Brands operates through the Dunkin' Donuts and Baskin-Robbins brands. Various sales and digital initiatives undertaken by the company such as more drive-through locations, menu innovation, breakfast menu optimization, the loyalty program and mobile ordering service should boost fourth-quarter results.

The company’s focus on expanding its beverage portfolio provides it with a great growth opportunity. Notably, the company opened 115 new stores worldwide in the last quarter, which could further enhance its top line in the to-be-reported quarter.

Nevertheless, like other restaurant chains, Dunkin' Brands' upcoming results are likely to be hurt by high labor expenses. Also, the breakfast segment – historically one of Dunkin' Brands' most profitable divisions – is facing immense competition with more companies grabbing the market share. This could hurt the company’s top line in the quarter.

Moreover, the company is experiencing lower-than-expected sale in ice cream products at both domestic and international segments, which also led it to lower overall revenue growth guidance. Also, a downward trend in the overall restaurant industry space might hurt traffic and comps in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Dunkin' Brands is likely to beat the Zacks Consensus Estimate 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. That is not the case here, as elaborated below.

Zacks ESP: Dunkin' Brands' Earnings ESP is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at 61 cents per share. 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).

As it is we caution 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 restaurant companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Carrols Restaurant Group, Inc. TAST has an Earnings ESP of +16.67% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Papa John’s International, Inc. PZZA has an Earnings ESP of +1.52% and a Zacks Rank #2.

YUM! Brands, Inc. YUM has an Earnings ESP of +2.78% and a Zacks Rank #3.
 
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Yum! Brands, Inc. (YUM): Free Stock Analysis Report
 
Papa John's International, Inc. (PZZA): Free Stock Analysis Report
 
Carrols Restaurant Group, Inc. (TAST): Free Stock Analysis Report
 
Dunkin' Brands Group, Inc. (DNKN): Free Stock Analysis Report
 
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