On Sep 27, 2014, Zacks Investment Research downgraded Bloomin' Brands, Inc. (BLMN) to a Zacks Rank #5 (Strong Sell) based on the company’s weak second-quarter results and soft guidance.
Why the Downgrade?
Analysts have been continuously downgrading estimates for Bloomin' Brands after it reported weak second-quarter results on Aug 5, wherein adjusted earnings of 27 cents missed the Zacks Consensus Estimate by 6.9% due to higher costs and expenses.
Total costs and expenses increased 10.3% year over year mainly due to rising beef prices. Bloomin' Brands offers beef products at its Italian as well as casual dining restaurants. Proteins account for 60% of the total commodities purchased by the company, of which approximately half constitutes beef.
Although revenues increased 9% year over year and surpassed the Zacks Consensus Estimate by 1.3%, shuttering of 29 restaurants since March last year and a substantial dip in comps in South Korea affected sales adversely.
Domestic comps were sluggish rising only 0.6% primarily due to flat traffic. Fleming's Prime Steakhouse and Wine Bar's domestic comps rose 3.6%, while Outback Steakhouse edged up 0.9% and Bonefish Grill increased 0.3%. However, Carrabba's Italian Grill declined 1.2% during the quarter.
Based on the bleak results, Bloomin’ trimmed the 2014 earnings outlook to a range of $1.05–$1.10 from $1.21. Further, the company expects third-quarter operating expenses to increase due to marketing, a Bonefish Grill menu rollout and costs from a Carraba's expansion in Brazil.
Not surprisingly, analysts continued to significantly revise down their earnings estimates for Bloomin’ Brands. Therefore, the Zacks Consensus Estimate for the third quarter of 2014 nosedived 46.7% to 8 cents per share over the last 60 days. For 2014, the Zacks Consensus Estimate declined 12.3% to $1.07 over the same time frame.
Other Stocks That Warrant a Look
Some better-ranked stocks in the same industry include Chipotle Mexican Grill, Inc. (CMG), Jamba, Inc. (JMBA) and DineEquity, Inc. (DIN). While Jamba sports a Zacks Rank #1 (Strong Buy), Chipotle and DineEquity carries a Zacks Rank #2 (Buy).
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