Citi cuts Bloomin' Brands target to $20, maintains neutral stance

On Friday, Citi adjusted its outlook for Bloomin' Brands (NASDAQ:BLMN), the parent company of casual dining restaurants, by reducing its price target for the company's shares from $22.00 to $20.00. The firm has kept its Neutral rating on the stock.

The adjustment came after Bloomin' Brands reported its second-quarter results for 2024 and issued new guidance. Citi revised its earnings per share (EPS) estimates for 2024 and 2025 to $2.10 and $2.29, respectively, down from the previous $2.34 and $2.39. This revision is based on more conservative expectations for comparable company sales.

The new price target of $20.00 is derived from applying a 5.5x multiple to the next twelve months' (NTM) estimated EBITDA, a figure that remains consistent with approximately 0.4x the market multiple. This valuation also suggests an approximate 15% free cash flow (FCF) yield, according to the firm's analysis.

Citi's revised estimates reflect a cautious outlook for Bloomin' Brands' future performance, taking into account the latest financial data and market conditions. The firm's neutral rating indicates a wait-and-see approach to the stock at this time.

In other recent news, Bloomin' Brands, the parent company of Outback Steakhouse, posted mixed results in its recent earnings report. The company's second quarter earnings per share (EPS) of $0.51 fell short of the consensus forecast by $0.07, according to BMO Capital Markets.

This shortfall was attributed to weaker-than-expected comparable sales and restaurant margins, which led BMO to reduce its price target for Bloomin' Brands from $27 to $20.

Despite the challenges, Bloomin' Brands reported that it outperformed the industry in U.S. comparable sales. However, overall revenue fell to $1.1 billion, a 3% drop from the previous year, and adjusted operating margins declined to 5.7%.

In response to these developments, the company has revised its full-year 2024 outlook for comparable sales and EPS downwards.

On a positive note, Bloomin' Brands is making progress on the potential refranchising of its operations in Brazil, a strategic move that has yet to impact financial projections. The company also plans to open 40-45 new restaurants and remodel 60-65 existing ones in 2024.

For the third quarter, Bloomin' Brands 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

As investors digest Citi's revised outlook on Bloomin' Brands, it's important to note that the company has experienced significant return over the last week, with a 10.43% price total return. However, the broader picture shows a decline, with a 33.05% decrease over the past year. This volatility is reflected in the company's stock price, which is currently at 57.15% of its 52-week high, priced at $17.26 at the previous close.

From a valuation perspective, Bloomin' Brands is trading at a high earnings multiple with a P/E ratio of 45.89, but when adjusted for the last twelve months as of Q2 2024, the P/E ratio seems more reasonable at 8.79. This discrepancy suggests the importance of looking at adjusted figures to get a clearer picture of the company's valuation. Furthermore, Bloomin' Brands pays a significant dividend to shareholders, with a current yield of 5.56%, which could be attractive for income-seeking investors.

For those considering an investment in Bloomin' Brands, it's worth noting that the company is profitable over the last twelve months, and analysts predict it will remain profitable this year. To gain more insights and access additional InvestingPro Tips, investors can explore https://www.investing.com/pro/BLMN, which currently lists 13 more tips to help make informed decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.