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Dunkin Brands (DNKN) to Report Q2 Earnings: What's in Store?

Zacks Equity Research

Dunkin’ Brands Group, Inc. DNKN is scheduled to report second-quarter 2017 numbers on Jul 27, before market opens.

Last quarter, Dunkin’ Brands delivered a positive earnings surprise of 12.50%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 6.10%.

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

Dunkin' Brands Group, Inc. Price and EPS Surprise

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

Factors Likely to Influence Q2 Results

Dunkin' Brands operates through the Dunkin' Donuts and Baskin-Robbins brands. Various sales and digital initiatives undertaken by the company such as faster and improved product innovation, targeted values and smart pricing, improving the restaurant-like experience, breakfast menu optimization, the loyalty program and mobile ordering service are expected to boost the quarter’s results.

Moreover, increased focus on establishing itself as a beverage leader provides the company a great opportunity for growth. In keeping with this strategy, the company’s Dunkin’ Donuts division has launched a variety of products including ready-to-drink bottled iced coffee, frozen coffee and fruited iced teas, which might enhance its top line in the to-be-reported quarter. We anticipate Dunkin' Brands robust unit expansion as well as its recent deal with Amtrak to further drive revenues.

Meanwhile, the company continues undertaking various initiatives to improve customer experience, expand convenience, and increase transactions. Evidently, Baskin-Robbins has expanded its delivery program in Saudi Arabia to include more than 30 delivery hubs, which should positively impact the brand’s sales.

Nevertheless, like other restaurant chains, Dunkin' Brands' upcoming results are also likely to be hurt by high labor expenses. Also, the Breakfast segment, historically one of the company’s most profitable divisions, is facing immense competition with more companies grabbing the market share. It should be noted that this might continue to hurt the company’s top line.

Additionally, challenging comps growth in international markets at both its divisions might hamper revenue growth. Also, a downward trend in the U.S. restaurant space might hurt traffic and in turn comps in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Dunkin’ Brands 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. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Dunkin’ Brands has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 62 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Dunkin’ Brands carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

YUM! Brands, Inc. YUM has an Earnings ESP of +1.64% and a Zacks Rank #2.

Expedia Inc. EXPE 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.

Texas Roadhouse, Inc. TXRH has an Earnings ESP of +1.89% and a Zacks Rank #3.

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