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How Much Upside Is Left in Dunkin’ Brands’ Stock Price?

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Stock performance

On July 3, Dunkin’ Brands (DNKN) was trading at $68.56, which represents a 10.5% increase since the April 26 announcement of its first-quarter earnings. In the first quarter, the company’s revenues and SSSG (same-store sales growth) were lower than analysts’ estimates. 

However, Dunkin’ Brands outperformed analysts’ earnings estimates of $0.53 by posting adjusted EPS of $0.62. The company’s management raised its adjusted EPS guidance for 2018 due to a revision in its share count and effective tax rate.

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Dunkin’ Brands’ management has adopted several measures that seem to have increased investors’ confidence, leading to an increase in the company’s stock price. These measures include positioning the company as a beverage-led brand, implementing its mobile-based On-the-Go initiative, and lowering its G&A (general and administrative) expenses.

Year-to-date performance

In 2017, Dunkin’ Brands (DNKN) returned 22.9%. Driven by this momentum, its stock price has increased 6.3% since the beginning of 2018. The company’s stock price is trading 34.7% higher than its 52-week low of $50.89 and 2.8% lower than its 52-week high of $70.55.

The stock prices of Dunkin’ Brands’ peers Starbucks (SBUX) and McDonald’s (MCD) have declined 15.1% and 9.1%, respectively, year-to-date. Among the broader comparative indexes, the S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR ETF (XLY) have returned 1.5% and 10.3%, respectively.

Series overview

In this series, we’ll look at analysts’ revenue and EPS expectations for Dunkin’ Brands for the next four quarters. We’ll cover its management’s guidance for 2018, and we’ll look at analysts’ recommendations and valuation multiples.

Let’s start by looking at analysts’ revenue expectations for the next four quarters.

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