Analyst David Palmer believes sales in the second half of the current year should accelerate citing innovative beverages apart from the early introduction of "On-the-Go mobile" order, which is reflected in the current share price appropriately. He also cited easier comparisons for the acceleration.
In a research note, the brokerage stated, "We are increasing slightly our Dunkin' US 3Q16 SSS growth estimate of 1 percent to 1.5 percent (cons. 1.2 percent) but trimming our 4Q SSS to 1.5 percent from 2 percent (cons. 1.8 percent). Our 3Q16e is now $0.59 (+12 percent YOY; cons. $0.58) and our 2016e EPS remains $2.20 (15 percent YOY; cons. $2.21), which includes the benefit of a 53rd week."
Looking ahead for the fiscal year 2017, RBC expects Dunkin' to deliver SSS growth of 1.5 percent in the United States. Similarly, the firm sees EPS growth of 9 percent at $2.40, which would be lower than the consensus estimate of $2.43. However, the forecast for 2018 has been lifted from $2.69 to $2.74 to represent share repurchases worth about $150 million compared to earlier expectations of $50 million.
The brokerage indicated that its increased tar price reflected its EPS estimate of 2018. The firm believes any additional upside catalyst could take a minimum of two years though there is room from accelerated share buyback and increased dividend.
On Friday, the stock closed at $51.33, and at last check Monday morning, it was down 1.15 percent at $50.74.
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