Bloomin Brands Performance Will Be Supported By Outback, Morgan Stanley Says

Although Bloomin' Brands Inc BLMN has achieved improved revenue growth in 2018, shares have lagged and its stock valuation is at the lower end of its casual dining peers, according to Morgan Stanley.

The Analyst

Morgan Stanley’s John Glass upgraded Bloomin Brands from Underweight to Equal-Weight, while keeping the price target at $19.

The Thesis

Shares of Bloomin Brands have declined 14 percent year-to-date, while the casual dining peer set has gained 12 percent. This has widened the valuation gap versus peers. Glass said the company’s stock has been under pressure, despite a significant improvement in sales during 2018.

Sales have been supported by the performance at Outback Steakhouse, where same-store sales have been higher than the industry average for the past seven quarters. Management expects sales trends to remain strong, given structural improvements in quality, service and marketing. Expanded delivery and remodels could also boost sales going ahead.

Support from such initiatives and industry tailwinds could propel Bloomin Brands’ sales in the first half of 2019, Glass said.

Bloomin Brands’ operating margins continue to be below peers, and the analyst said this represents an opportunity for expansion in 2019, despite continued labor inflation headwind.

Price Action

Shares of Bloomin Brands closed Tuesday at $18.08, up 3.6 percent.

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