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Is There More Upside to Dunkin’ Brands Stock?

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Stock performance

As of March 19, Dunkin’ Brands (DNKN) was trading at $71.55, which represents a rise of 3.9% since the announcement of its fourth-quarter earnings on February 7. The company is trading at a premium of 24.8% from its 52-week low of $57.33, and a 7.2% discount on its 52-week high of $77.13.

In the fourth quarter, Dunkin’ Brands posted adjusted EPS of $0.68, outperforming analysts’ expectation of $0.61. However, the company’s revenue and SSSG (same-store sales growth) in the US fell short of analysts’ expectation. Although Dunkin’ Brands’ sales were lower than analysts’ expectations, the company’s stock price rose due to investors’ optimism surrounding the remodeling of its restaurants to NextGen restaurants, customers’ positive response to the nationwide launch of espresso beverages in late November, and the implementation of technological advancements.

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Year-to-date performance

In 2018, Dunkin’ Brands had lost 0.5% of its value. However, the company has had a strong beginning to 2019. The company’s stock price has increased by 11.6% YTD as of March 19. In comparison, peers Starbucks (SBUX) and McDonald’s (MCD) have returned 10.8% and 3.1% YTD. Also, the Consumer Discretionary Select Sector SPDR ETF (XLY), which has invested 8.3% of its holdings in restaurant and travel companies, has returned 13.4% during the same period.

Series overview

In this series, we’ll look at analysts’ expectations and management’s guidance for 2019. We’ll also be covering the factors that could drive the company’s revenue and EPS during the period. First, let’s look at analysts’ recommendations and Dunkin’ Brands’ valuation multiple.

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