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Friday, Benchmark analysts revised their price target for Denny's Corporation (NASDAQ:DENN) shares, lowering it to $8 from $10, while still maintaining a Buy rating. The adjustment followed Denny's recent fourth-quarter financial results, which were unveiled prior to the market opening on Tuesday. The stock has taken a significant hit, falling nearly 24% over the past week according to InvestingPro data, and now trades near its 52-week low of $4.91. The company's performance indicated a slight miss on profitability, with adjusted earnings per share (EPS) falling $0.01 short of the consensus estimates.
Denny's reported quarterly revenues of $114.7 million, which did not meet the anticipated $116 million. The company's trailing twelve-month revenue stands at $452.33 million, with a gross profit margin of 34.27% according to InvestingPro data. The shortfall was partly due to the company's accelerated closure of franchisee-operated restaurants during the fourth quarter. This move is part of Denny's strategy to eliminate 150 underperforming units from its operations by the end of 2025. Despite the revenue miss, Denny's managed to align its adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) with consensus expectations at $22.2 million.
The company's adjusted EPS for the quarter came in at $0.14, which was a cent below what analysts had predicted. The Benchmark analyst cited the challenging start to the year experienced by Denny's, along with conservative guidance for the fiscal year 2025 based on recent performance softness, as the reasons for the price target revision.
Denny's efforts to streamline its operations by closing underperforming locations are part of a broader initiative to improve its financial health and efficiency. Despite the lower-than-expected fourth-quarter results, Benchmark's continued Buy rating indicates a positive outlook on the stock's potential moving forward.
Investors and market watchers will be keeping a close eye on Denny's as it progresses with its restructuring plan and adapts to the dynamic market conditions. With a P/E ratio of 12.19 and trading below its InvestingPro Fair Value, the stock shows potential upside according to analysts, who maintain price targets ranging from $7 to $8.50. The company's future performance will be critical in determining whether it can achieve the targets set forth in its fiscal year 2025 guidance. For deeper insights into Denny's financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Denny's Corporation reported fourth-quarter earnings and revenue that fell short of analyst expectations, sparking concern for investors. The company's adjusted earnings per share were $0.14, missing the $0.15 consensus estimate, and revenue was reported at $114.7 million, below the anticipated $116.08 million. Denny's domestic system-wide same-restaurant sales rose by 1.1% in Q4, while its Keke's brand saw a 3% increase. However, for the full year 2024, Denny's same-restaurant sales dipped by 0.2% and Keke's fell 1.7%. Looking ahead, Denny's provided a cautious outlook for 2025, projecting domestic system-wide same-restaurant sales between -2.0% and 1.0%. The company plans to continue closing lower-volume restaurants and expanding its Keke's brand, with an expected 25 to 40 new openings and 70 to 90 closures in 2025. These are among the recent developments for the company.
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