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Wedbush's Checks With Dunkin Franchisees Points To Bullish Outlook

Wedbush's Checks With Dunkin Franchisees Points To Bullish Outlook

First-hand conversations and checks with Dunkin Brands Group Inc (NASDAQ: DNKN) prompted one research firm to upgrade the coffee chain's stock.

The Analyst

Wedbush's Nick Setyan upgraded Dunkin Brands from Neutral to Outperform with a price target lifted from $76 to $92.

The Thesis

Dunkin franchisees expressed a "noticeable uptick in positive expectations" from a combination of lower cannibalization due to slower unit growth, simplification of the menu, technology initiatives, and a better focus on expanding the brand message.

Setyan said the encouraging initiatives helped generate a higher throughput, especially during morning hours and this trend looks sustainable beyond the near term.

Looking forward, same-store sales growth should come in above consensus estimates of 1.3% in the second quarter at 2%, according to Setyan. This growth rate implies an acceleration in a two-year stack from 1.9% to 3.4%. Encouragingly, each 1% of comp growth would translate to 2 cents to 4 cents of incremental earnings per share.

Bottom line, signs of an inflection point beyond the near term at Dunkin is "high enough" to warrant a bullish stance on the stock.

Price Action

Shares of Dunkin Brands hit a new all-time high of $83.22 Monday morning and were higher by around 2% to $81.26 at time of publication.

Related Links:

Cramer Passes On Buying Coffee Stocks — For Now

Valuation Concerns Prompt BMO To Downgrade Dunkin' Brands

Latest Ratings for DNKN

Oct 2019UpgradesMixedPositive
Aug 2019MaintainsBuy
Aug 2019MaintainsBuy

View More Analyst Ratings for DNKN
View the Latest Analyst Ratings

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