Why There Could Be Upside To Current Expectations For Denny's Q3

Iconic American diner Denny's Corporation DENN may be providing some significant upside, according to Wedbush securities.

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.

Related Link: Darden's Comps, Outperformance More Than A Flash In The Pan

"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.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!
Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorLong IdeasNewsTerminationPrice TargetReiterationRestaurantsAnalyst RatingsMoversTrading IdeasGeneralWedbush
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!