Will Strong 4Q16 Earnings Boost Dunkin’ Brands’ Stock Price?
Dunkin’ Brands (DNKN), which operates the Dunkin’ Donuts and Baskin-Robbins brands, is set to announce its 4Q16 earnings before the market opens on February 9, 2017.
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In 3Q16, the company posted adjusted EPS (earnings per share) of $0.6 on revenue of $207.1 million. Analysts were expecting the company to post EPS of $0.59 on revenue of $214.4 million. Although Dunkin’ Brands outperformed its earnings estimate, its lower-than-expected sales and falling revenue growth forecast for 2016—to 2% from the earlier 3%–5%—made investors wary about its future earnings. This skepticism led to a fall in Dunkin’s stock price.
However, the victory of Donald Trump in the US presidential election boosted the company’s stock price. Investors expect Trump to loosen regulations, which could be beneficial to restaurant chains.
Since the announcement of DNKN’s 3Q16 earnings on October 20, 2016, its stock price has risen 1.9%.
Year-to-date stock performance
Although its 3Q16 results were lower than expected, DNKN returned 28.1% in 2016. Year-to-date, the stock has fallen 0.9%. Since the beginning of 2017, Dunkin’ Brands’ peers Starbucks (SBUX) and Panera Bread (PNRA) have returned 0.7%, and 2.7%, respectively.
During the same period, the Consumer Discretionary Select Sector SPDR ETF (XLY) has returned 4.3%. XLY invests ~9.6% of its holdings in restaurant companies.
This pre-earnings series will explore what we can expect from Dunkin’ Brands’ 4Q16 earnings release. The series will cover analysts’ estimates for DNKN’s revenue, EBIT (earnings before interest and tax) margins, and EPS. To wrap up the series, we’ll look at the company’s valuation multiple and expected stock price over the next 12 months.
First, let’s look at Dunkin’s 4Q16 revenue estimates.