Driven by strong same-store sales growth, expense control and share repurchases, Wedbush is expected earnings per share of $0.14 on revenues of $129 million. These figures are slightly ahead of the consensus EPS of $0.13 and $128 million in revenue.
Wedbush believes several factors are working in Denny's favor, including restaurant remodels, additional compelling menu innovation and a customer demographic benefitting from lower gas prices, increased employment and wage growth. Denny's is expected to report Q3 results on November 1.
"We believe continued labor expense management, an even more favorable 2h:16 commodity environment, and accretive franchisee acquisitions could drive further EBITDA upside as the year progresses," said Wedbush analysts.
The bulk of Denny's franchise remodels are expected to take place between 2016 and 2018. Denny's royalty rate topped 4 percent for the first time, due to higher royalty agreements from franchisees. Denny's also has $130 million in share repurchases still authorized.
Wedbush maintains an Outperform rating with a $14 price target, providing some significant upside.
At last check, Denny's was up 2 percent Friday, trading at $10.44.
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