Dunkin' Donuts Upgraded After Another Earnings Beat

National Doughnut Day is past, but now’s the time to buy doughnuts.

Dunkin Brands Group Inc DNKN enjoys “strong opportunities” to expand both in the U.S. and overseas, according to Argus, which upgraded Dunkin' to Buy on Tuesday.

The chain, which reported first-quarter earnings May 4, has a fully franchised business model that Argus projects will generate “significant” free cash flow.

Argus upgraded Dunkin’ Brands from Hold to Buy and set a $68 price target on Tuesday.

The firm also raised its 2017 EPS estimate for the company from $2.44 to $2.46 and its 2018 EPS estimate from $2.70 to $2.74.

“Over the long term, we remain optimistic about Dunkin’s strong franchise program, established brands, digital sales initiatives and opportunities to expand into new sales channels and geographic regions,” John Staszak said.

A Bullish Restaurant Story

Dunkin’ first-quarter results were largely positive, according to Argus: Net income of $50.7 million was up from $40.7 million a year ago, and adjusted EPS was $0.54, above the consensus of $0.48. Revenue of $190.7 million missed the consensus of $192.3 million.

The company’s earnings have beat expectations for six quarters in a row, Staszak said.

Same-store sales at Dunkin’ locations in the U.S. are expected to grow an average of 1.2 percent over the next 12–18 months, Staszak said.

The company is streamlining its menu and speeding up the launch of new menu items that “should result in higher overall pricing,” he said.

The Dunkin’ Perks loyalty program is also being expanded; it accounts for 10 percent of the company’s revenue, according to Argus.

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