Dunkin' Brands Group, Inc. DNKN reported solid third-quarter 2018 results, with earnings and revenues surpassing the Zacks Consensus Estimate. This marked the fourth straight quarter of an earnings beat.
Adjusted earnings of 83 cents per share surpassed the consensus estimate of 73 cents by 13.7%. The bottom line also improved 69.4% on a year-over-year basis driven by rise in net income and fall in shares outstanding.
Revenues were up 6% year over year to $350 million, which exceeded the consensus mark of $344 million. The top line improved primarily owing to a rise in royalty income from system-wide sales growth and an increase in advertising fees and related income.
The company's global system-wide sales rose 5.2% from the prior-year quarter from 4.4% in the second quarter of 2018. System-wide sales were favored by global store development along with Dunkin' U.S. and Baskin-Robbins International comps growth.
Following the quarterly numbers, the company's shares ended 4.8% higher. In a year's time, the stock has surged 34.4%, outperforming the industry
's 7.1% rise. Segmental Performance
Dunkin' Brands operates through Dunkin' and Baskin-Robbins brands.
Dunkin' U.S. reported revenues of $157.3 million, which reflects an increase of 4% from the prior-year quarter. The upside can be attributed to higher royalty income driven by systemwide sales growth. Comps also climbed 1.3% in the quarter owing to increase in average ticket, which was partially overshadowed by a decline in traffic. Moreover, higher beverage sales and menu innovation led to comps growth in the reported quarter.
Dunkin' International division reported revenues of $6.3 million, mirroring an increase of 27.3% from the prior-year quarter. The improvement was primarily backed by rise in royalty income and franchise fees. Additionally, comps increased 2.5% compared with 1.3% gain in the preceding quarter.
Baskin-Robbins U.S. revenues increased 2.7% from the prior-year quarter to $13.7 million due to increase in sales of ice cream and other products as well as an increase in franchise fees and royalty income. Comps rose 1.8% against 0.4% decline in the year-ago quarter.
Baskin-Robbins International division revenues came in at $31.2 million, marking an increase of 7.6% year over year driven by rise in sales of ice cream and other products. Comps increased 7.5% against a decline of 4.3% in the preceding quarter. Dunkin' Brands Group, Inc. Price, Consensus and EPS Surprise
Dunkin' Brands Group, Inc. Price, Consensus and EPS Surprise | Dunkin' Brands Group, Inc. Quote
Adjusted operating income rose 5.2% from the year-ago quarter to $116.9 million mainly owing to an increase in royalty income offset by increase in general and administrative expenses. Adjusted operating income margin dipped 30 basis points to 33.4%.
Dunkin' Brands exited the third quarter with cash and cash equivalents of $428.2 million, compared with $1 billion at the end of 2017. Restricted cash totaled $79.4 million, down from $94 million as of Dec 30, 2017. Accounts receivables summed $133.7 million, down from $121.8 million at the end of 2017. Long-term debt was approximately $3 billion.
Dunkin' Brands expects adjusted earnings in the range of $2.80-$2.82 per share (up from the previously guided range of $2.68-$2.72). The Zacks Consensus Estimate for 2018 earnings is pegged at $2.73.
The company continues to expect low-to-mid single-digit revenue growth, with Dunkin' U.S. comps improving 1%. Also, the company expects Dunkin' U.S. franchisees to add more than 275 new restaurants. It also expects low-single digit comparable sales growth for Baskin-Robbins U.S. It continues to expect low-to-mid single digit percent total revenue growth. Moreover, operating and adjusted operating income growth is anticipated in mid-single digit.
Zacks Rank & Stocks to Consider
Dunkin' Brands carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the same space include Good Times Restaurants Inc. GTIM , carrying a Zacks Rank #1 (Strong Buy), while BJ's Restaurants, Inc. BJRI and Darden Restaurants, Inc. DRI carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Good Times Restaurants has an impressive long-term earnings growth rate of 38.9%.
BJ's Restaurants has an expected current-year earnings growth rate of 51.1%.
Darden Restaurants reported better-than-expected earnings in the last four quarters, the average beat being 5.1%.
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