Analyst At BMO Says Bloomin' Brands Not Living Up To Potential

BMO analyzed Bloomin' Brands Inc BLMN performance and potential. The company reported 2Q16 EPS of $0.30, beating the consensus estimate by $0.01, and lowered its 2016 EPS guidance to at least $1.35 owing to lower U.S. comps.

"The gap between BLMN's performance and underlying potential continues to widen and BLMN continues to search for a sales-driving strategy that resonates with customers. While the shift away from price promotions is a sound strategy over the long term, it undoubtedly creates a more risky near-term comp outlook than we otherwise expected," wrote BMO.

However, the analyst maintained their view that the company's earnings potential is underappreciated and that their thesis would begin to unfold over the next several quarters. BMO provided four aspects of their thesis, which are mentioned below:

• "The company continues to make progress on its sale-leasebacks, with proceeds at or above levels assumed in our accretion model (+$0.30 run-rate benefit to EPS)."
• "We are increasingly confident BLMN will benefit from lower beef prices in 2017, if not in the back half of 2016."
• "We estimate BLMN can achieve at least $20-25 million of G&A efficiencies."
• "Cost savings coupled with incremental share repurchases (separate of the sale-leaseback repurchases, such as with the cash repatriated from South Korea) create additional EPS opportunities."

The analysts reiterated an Outperform rating and $22 price target, which is based on 7.5x-8.0x 2017 EBITDA.