Credit Suisse SSS Checks Show Surprise Potential At Dunkin Donuts

Dunkin Brands Group Inc DNKN is scheduled to report its 1Q results on April 28. Credit Suisse’s Jason West maintained an Outperform rating for the company, with a price target of $50, while raising the estimates based on positive 1Q checks.

Positive SSS Checks

“Our franchisee checks, while anecdotal, suggest Dunkin' US SSS accelerated in 1Q16 vs. 4Q15 (-0.8%), driven by favorable weather and, to a lesser extent, new promotions and menu adjustments,” analyst Jason West wrote.

What Has Changed

The US SSS estimate for 1Q16 has been raised from -0.5 percent to +2.0 percent, following the positive checks. The current estimate is 190bps above consensus.

The EPS estimate for the quarter has been raised from 42c to 43c, in-line with consensus. West forecasted buybacks in 1Q of $60mm, higher than the Street expectation of $42.5mm.

West added, however, that Dunkin Brands’ shares have gained 25 percent since their January lows, indicating that investors “are already expecting some sales upside” in 1Q, based on favorable weather in the Northeast and the company’s exposure to that region.

2Q Expectations

Dunkin Brands faces the toughest comps in the second quarter, West noted. He projected Dunkin' US SSS at +0.5 percent, 10bps below consensus.