BLMN | ANOTHER BACK HALF MISS?

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 1

 

On the heels of the BWLD and PNRA “miss and guide down” we wanted to highlight another “miss and guide down” name, Bloomin’ Brands (BLMN). BLMN is not currently on our list and although we don’t see it as a long term LONG, given the stock performance of BWLD and PNRA on their earnings, up ~11% and ~8%, respectively, this relatively cheap stock could see a “miss and guide down” and similar pop.

 

BLMN has their 2Q15 earnings conference call on Tuesday, August 4, at 9:00am ET.

 

The company’s current guidance of same-store sales of “at least” 1.5% and EPS of “at least” $1.27 will be difficult to achieve.  We believe that same-store sales will be between 0-0.5% and EPS will be closer to $1.20.

 

BLMN is down ~10% year-to-date, so expectations are not high for the company, except sell-side estimates are too high for fiscal 2015.  BLMN (like BWLD and PNRA) has seen a significant increase in the short interest over the past three months.  If the beat and miss is less than feared the shorts will likely be forced to cover following the earnings release.     

 

PERFORMANCE

As we just stated BLMN is down ~10% YTD, while the S&P 500 is up ~2.4%. Expectations for this company are low and we think there is a possibility of the company missing by “not that much” which would probably yield a positive reaction.

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 2

 

SAME-STORE SALES

Consolidated same-store sales (SSS) are projected to decelerate modestly for the next three quarters. Management’s focus continues to be on Outback, which represents the only brand that matters for the company. Outback needs to maintain positive momentum in order for the company to succeed. This is crux of our issue with BLMN, because we have little faith in the Outback concept long-term.

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 3

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 4

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 5

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 6

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 7

 

MARGINS

Restaurant level margins are trending upwards, thanks to cost management practices.

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 8

 

EBIT margins are similarly benefiting seeing larger % increases YoY in 1Q15 than Restaurant level margins.

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 9

 

VALUATION

This stock is cheap, but rightfully so, multi-concept casual dining chains are disadvantaged from the get-go given the lack of focus and capital allocation issues. But with BLMN currently trading at 8.15x EV / NTM EBITDA, it is trading at a steep discount to the competition, but deservingly so.

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 10

 

SHORT INTEREST

Currently short interest is 5.5% of the float, there is not a big bet against this company currently, but short interest is rising heading into the quarter.

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 11

 

SENTIMENT

The street cannot get more bullish on this company, 79% of analysts covering the stock have a buy rating, with zero sell ratings.

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 12

 

HEDGEYE RESTAURANTS IDEAS LIST

BLMN | ANOTHER BACK HALF MISS? - BLMN CHART 13 


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