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High Marketing Costs to Hurt Dine Brands' (DIN) Q1 Earnings
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Dine Brands Global, Inc. (DIN - Free Report) , formerly known as DineEquity, Inc., is scheduled to release first-quarter 2018 numbers on May 2, before market open.
The company’s initiatives to improve guest satisfaction via remodeling efforts and expansion of off-premise business that includes online ordering and delivery, are expected to reflect in first-quarter revenues. However, an increase in expenses related to sales initiatives along with prevalence of high labor costs in the restaurant operating environment are likely to have dented earnings in the to-be-reported quarter.
Nevertheless, the company has also developed top-tier consumer insights and analytics to understand guest preference and enhance the status of its brand. Subsequently, shares have climbed 32.7% in the past year, outperforming the industry’s gain of 4%.
Let’s take a look at how the company’s top and bottom line will shape up in the soon-to-be-reported quarter.
Top Line to Gain From Brand Transition Initiatives
In the last reported quarter, Dine Brands mentioned that it has shifted its corporate resources directly to its two brands, resulting in greater autonomy and accountability of the company. To accelerate sustainable growth, the company is focusing on key areas across the organization including brand leadership, culinary, operations and marketing.
To expand the base business, the company invested in technology and growth platforms such as to-go offering for developing incremental revenue channels at both IHOP and Applebee's. In fact, these initiatives have reflected in fourth-quarter 2017 comps performance. In the fourth quarter, Applebee's domestic system-wide comps increased 1.3%. This compares favorably with the third quarter’s decrease of 3.2% and the prior-year quarter’s decline of 7.2%. IHOP’s domestic system-wide comps were down 0.4%, comparing favorably with the last quarter’s decline of 7.7% and the prior-year quarter’s fall of 2.1%.
The upside trend is expected to continue in the first quarter of 2018 as well. The Zacks Consensus Estimate projects comps at IHOP to grow 1% in the first quarter. Also, the consensus estimate for first-quarter sales is pegged at $173.59 million, reflecting 11.2% increase from the prior-year quarter.
High Costs to Dent Earnings
Alongside high labor costs associated with restaurant operations, Dine Brands has also been facing increased expenses related to sales initiatives that might dent the quarter’s profits. Also, incremental investments in marketing programs and promotional activity to combat competition are expected to weigh on its margins. In fact, the consensus estimate for first-quarter earnings of $1.07 reflects a year-over-year decline of 12.3%.
Our Quantitative Model Does Not Predict a Beat
Dine Brands does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: The company has an Earnings ESP of -4.67%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Dine Brands has a Zacks Rank #2 (Buy).
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Brinker (EAT - Free Report) has an Earnings ESP of +1.62% and holds a Zacks Rank #3. The company is slated to report first-quarter results on May 1, before market open.
Wingstop (WING - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +5.66%. Wingstop is scheduled to release first-quarter results on May 3, after market close.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Image: Bigstock
High Marketing Costs to Hurt Dine Brands' (DIN) Q1 Earnings
Dine Brands Global, Inc. (DIN - Free Report) , formerly known as DineEquity, Inc., is scheduled to release first-quarter 2018 numbers on May 2, before market open.
The company’s initiatives to improve guest satisfaction via remodeling efforts and expansion of off-premise business that includes online ordering and delivery, are expected to reflect in first-quarter revenues. However, an increase in expenses related to sales initiatives along with prevalence of high labor costs in the restaurant operating environment are likely to have dented earnings in the to-be-reported quarter.
Nevertheless, the company has also developed top-tier consumer insights and analytics to understand guest preference and enhance the status of its brand. Subsequently, shares have climbed 32.7% in the past year, outperforming the industry’s gain of 4%.
Let’s take a look at how the company’s top and bottom line will shape up in the soon-to-be-reported quarter.
Top Line to Gain From Brand Transition Initiatives
In the last reported quarter, Dine Brands mentioned that it has shifted its corporate resources directly to its two brands, resulting in greater autonomy and accountability of the company. To accelerate sustainable growth, the company is focusing on key areas across the organization including brand leadership, culinary, operations and marketing.
To expand the base business, the company invested in technology and growth platforms such as to-go offering for developing incremental revenue channels at both IHOP and Applebee's. In fact, these initiatives have reflected in fourth-quarter 2017 comps performance. In the fourth quarter, Applebee's domestic system-wide comps increased 1.3%. This compares favorably with the third quarter’s decrease of 3.2% and the prior-year quarter’s decline of 7.2%. IHOP’s domestic system-wide comps were down 0.4%, comparing favorably with the last quarter’s decline of 7.7% and the prior-year quarter’s fall of 2.1%.
The upside trend is expected to continue in the first quarter of 2018 as well. The Zacks Consensus Estimate projects comps at IHOP to grow 1% in the first quarter. Also, the consensus estimate for first-quarter sales is pegged at $173.59 million, reflecting 11.2% increase from the prior-year quarter.
High Costs to Dent Earnings
Alongside high labor costs associated with restaurant operations, Dine Brands has also been facing increased expenses related to sales initiatives that might dent the quarter’s profits. Also, incremental investments in marketing programs and promotional activity to combat competition are expected to weigh on its margins. In fact, the consensus estimate for first-quarter earnings of $1.07 reflects a year-over-year decline of 12.3%.
Our Quantitative Model Does Not Predict a Beat
Dine Brands does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: The company has an Earnings ESP of -4.67%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Dine Brands has a Zacks Rank #2 (Buy).
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
DineEquity, Inc Price and EPS Surprise
DineEquity, Inc Price and EPS Surprise | DineEquity, Inc Quote
Stocks to Consider
Here are some companies in the restaurant space, which per our model have the right combination of elements to post an earnings beat this quarter.
Domino's (DPZ - Free Report) has an Earnings ESP of +0.20% and holds a Zacks Rank #3. The company is scheduled to report first-quarter results on Apr 26, before market open. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brinker (EAT - Free Report) has an Earnings ESP of +1.62% and holds a Zacks Rank #3. The company is slated to report first-quarter results on May 1, before market open.
Wingstop (WING - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +5.66%. Wingstop is scheduled to release first-quarter results on May 3, after market close.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>