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On Tuesday, Truist Securities adjusted its outlook on Denny’s Corporation (NASDAQ:DENN) shares, reducing the price target from $8.00 to $7.00 while sustaining a Buy rating on the stock. The adjustment comes in the wake of Denny’s first-quarter performance, which saw both same-store sales (SSS) and adjusted EBITDA fall short of consensus expectations, alongside downwardly revised company guidance. According to InvestingPro data, Denny’s shares are currently trading at $3.91, significantly below both Truist’s target and the broader analyst range of $5.75-$8.00, suggesting potential upside opportunity. The company’s EBITDA stands at $63.87 million for the last twelve months.
According to Truist Securities, Denny’s has begun to counteract macroeconomic pressures by introducing a value-oriented promotion, specifically the Grand Slam $1 Buy One Get One (BOGO) offer. This strategy reportedly led to a notable improvement in April’s SSS, which reached a ’flat’ level after a roughly 3.0% decline in March. Analysts at Truist anticipate that Denny’s will continue to roll out similar value promotions throughout 2025, coupled with ongoing menu innovation and technological enhancements, such as an updated rewards program set to launch in the second half of the year. These initiatives are expected to contribute to a modest but sustained improvement in SSS from the levels seen in the first quarter. InvestingPro analysis shows the company remains profitable with a P/E ratio of 9.49, despite recent challenges. Get access to 10+ additional ProTips and comprehensive analysis with an InvestingPro subscription.
The report from Truist also highlights Denny’s current trading position, noting that the company’s shares are trading at less than half of its pre-COVID enterprise value to EBITDA (EV/EBITDA) multiple. The current EV/EBITDA stands at 9.27x, according to InvestingPro data, which indicates the stock is currently undervalued compared to its Fair Value estimate. Additionally, the stock boasts an approximate 14% free cash flow yield. Based on these metrics, Truist Securities reaffirms their view that there is significant upside potential for Denny’s shares. Discover detailed valuation analysis and more insights with InvestingPro’s comprehensive research reports, available for 1,400+ US stocks.
The analyst’s remarks underscore the company’s proactive measures to navigate through challenging economic conditions. With the planned enhancements and strategic offers, Denny’s aims to drive customer traffic and improve financial performance in the face of ongoing macroeconomic headwinds.
In other recent news, Denny’s Corporation reported its first-quarter 2025 earnings, which aligned with analyst expectations, posting an earnings per share (EPS) of $0.08 and revenue of $111.6 million. Despite meeting forecasts, the company noted a 3% decline in same-store sales, although its Keke’s brand saw a 3.9% increase in the same metric. Denny’s has committed to its full-year same-store sales growth and EBITDA forecasts but expects results to be at the lower end of its projected ranges due to higher food inflation. KeyBanc Capital Markets maintained its Sector Weight rating on Denny’s stock, noting the company’s strategic focus on value offerings like the Buy One Get One for $1 Slam promotion, which helped stabilize sales trends in April.
The firm adjusted its 2025 EPS estimate for Denny’s downward to $0.44, reflecting the impact of higher food inflation and a slight reduction in same-store sales growth expectations. Denny’s plans significant restaurant closures and remodels to enhance competitiveness, while also anticipating increased commodity costs. The company aims to close 70-90 restaurants this year and expects commodity costs to rise by 35%. Denny’s continues to focus on value-driven strategies and digital enhancements, with CEO Kelly Valade emphasizing the company’s strength in value leadership.
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