Market Overview

Bear of the Day: Bloomin' Brands (BLMN) - Bear of the Day


It has been a very rough stretch for the restaurant industry as a number of issues have conspired to drag down many names in the space. First, it was wild weather that kept many customers at home, but then sluggish economic conditions and broad investor concerns about heavy competition and changing consumer tastes acted as the next catalyst to send stocks lower in this industry.

Take for example Bloomin' Brands (NASDAQ: BLMN), the company behind brands such as Outback Steakhouse, Carrabbas Italian Grill, and Flemings Prime Steakhouse and Wine Bar, just to name a few. The company started off the year on an ok footing, but never really recovered from there, losing nearly 25% so far this year and over 18% in the past three months alone.

What Happened?

The main reason for the slump is really the most recent earnings report, as the company fell short of estimates by two cents a share, a roughly 6.9% miss. However it was the outlook that really disappointed investors and caused the massive slide as of late.

In their revision to guidance, management slashed its full year estimate from $1.21/share down to a range of between $1.05-$1.10/share. This suggests that the outlook is sliding for BLMN and that more trouble could be ahead to end the year.

This has been further confirmed more recently by sluggish same store sales for many of the company's key brands. In other words, it isn't looking too favorable for BLMN to close out the calendar year and that the company may have issues getting back to a solid growth rate.

Analysts' Take

Those tracking the company seem to agree with this negative assessment as every earnings estimate revision as of late has been lower. 10 have gone lower for the full year, while nine have gone lower for the next fiscal year, suggesting total agreement about BLMN's prospects.

Not only has there been agreement among analysts, but the magnitude of revisions has been pretty big too. Current quarter estimates have fallen from 15 cents a share 60 days ago to just eight cents a share today. The full year has also seen a drop, with estimates sliding from $1.22/share 60 days ago to $1.07/share today.
Clearly, analysts are thinking that the company's near term prospects aren't looking too great. For this reason, it isn't too surprising that BLMN has earned itself a Zacks Rank #5 (Strong Sell) and that we are expecting more weakness out of this company in the months ahead.

Other Picks

For investors who want to stay in the restaurant segment, it is worth noting that the industry rank here is pretty unfavorable, coming in at the bottom 40%. However, there are a few companies that could still be worth a closer look as they both have top Zacks Ranks.

These include Chipotle Mexican Grill (NYSE: CMG) and Jamba (NASDAQ: JMBA), two companies that had a positive EPS surprise last quarter and have moved into ‘strong buy' territory in just the past week. Given that, either could be a better selection than BLMN, at least until the company can turn around its struggling same store sales, and see earnings estimates rise once more.

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