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On Wednesday, BMO Capital Markets adjusted its stance on shares of Bloomin' Brands Inc. (NASDAQ:BLMN), reducing the price target for the company's shares to $20 from the previous $27, while maintaining a Market Perform rating. The adjustment comes in response to the company's second-quarter earnings per share (EPS) of $0.51, which was $0.07 shy of the consensus forecast.
The shortfall was attributed to weaker-than-expected comparable sales (comps) and restaurant margins, which could not be fully mitigated by general and administrative (G&A) cost favorability.
Bloomin' Brands, known for its Outback Steakhouse brand among others, has revised its full-year 2024 outlook for comparable sales and EPS downwards. The company has also set its third-quarter guidance below the market consensus, pointing to the influence of softer industry trends than initially anticipated. This news reflects broader challenges within the restaurant industry.
Additionally, Bloomin' Brands mentioned that it is making progress on the potential refranchising of its operations in Brazil. This move is part of the company's strategic efforts but has yet to translate into improved financial projections.
The report from BMO Capital highlights the relatively low cost of Bloomin' Brands shares but also notes that the current operating environment poses near-term risks. This environment, along with the specific market positioning of the Outback Steakhouse brand, contributes to uncertainties regarding the company's ability to achieve a more robust and lasting performance. BMO Capital has thus recalibrated its expectations for the stock in light of these factors.
In other recent news, Bloomin' Brands, the parent company of Outback Steakhouse, reported mixed second-quarter financial results. Despite outperforming the industry in U.S. comparable sales, the company saw a decline in overall revenue and adjusted operating margins.
The company's adjusted diluted earnings per share stood at $0.51, a decrease from $0.70 in the same quarter of the previous year. Total revenues fell to $1.1 billion, a 3% drop from the prior year, and adjusted operating margins were down to 5.7%.
Despite these challenges, Bloomin' Brands plans to focus on restaurant growth and customer experience. The company intends to open 40-45 new restaurants and remodel 60-65 existing ones in 2024. Off-premises business made up 24% of U.S. sales. The company also repurchased 9.9 million shares for about $263 million year-to-date and ended the quarter with $884 million in total debt net of cash.
Looking ahead, the company has updated its full-year guidance to reflect a softer industry environment, with comparable sales expected to be flat to down 100 basis points. Adjusted diluted earnings per share guidance is set between $2.10 and $2.30, with an adjusted tax rate of 8% to 10%. Capital expenditures guidance has been lowered to $260 million to $270 million. For the third quarter, the company anticipates U.S. comparable restaurant sales to be flat to down 2%, with adjusted diluted earnings per share between $0.17 and $0.25.
InvestingPro Insights
In light of BMO Capital's recent analysis of Bloomin' Brands Inc. (NASDAQ:BLMN), real-time data from InvestingPro provides further context to the company's financial health and market performance. An InvestingPro Tip highlights that management has been actively buying back shares, indicating a potential confidence in the company's value.
Moreover, with the stock trading near its 52-week low and having taken a significant hit over the last six months, investors may find the current price levels an interesting entry point, especially considering the company's significant dividend yield of 5.65% as of the latest data.
From a valuation perspective, Bloomin' Brands is trading at a forward P/E ratio of 8.81, which may appeal to value investors seeking lower earnings multiples. However, the company's gross profit margins stand at 16.32%, which could be a concern for those looking at operational efficiency. Despite these challenges, analysts predict the company will be profitable this year, as evidenced by a profitable performance over the last twelve months.
For those seeking a deeper dive into the company's prospects, InvestingPro offers additional insights and metrics. There are 11 more InvestingPro Tips available, which could provide valuable guidance for investors considering Bloomin' Brands as part of their portfolio. For a comprehensive analysis, interested parties are encouraged to explore these tips on InvestingPro.
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