On Thursday, Goldman Sachs initiated coverage on Bloomin' Brands (NASDAQ:BLMN) with a Sell rating and set a price target of $13.00, close to the current trading price of $12.92. The stock has fallen over 50% year-to-date and trades near its 52-week low of $12.26, significantly below its high of $30.12. The firm expressed caution regarding the restaurant company's near-term prospects, citing the challenges faced by its core brand, Outback Steakhouse.
According to InvestingPro data, 12 analysts have recently revised their earnings expectations downward for the upcoming period. According to the firm's analysis, a turnaround for Outback will likely require significant time and effort, including changes to the labor model and store investments.
The report notes that Bloomin' Brands is at an early stage of implementing its improvement strategies under the leadership of CEO Michael Spanos, who took the helm in September 2024. The company is expected to encounter a longer and more uneven path to recovery over the next few years. This is due to the need to reinvest across its assets and brands during a period when competitors are also ramping up their investments, which could necessitate even greater efforts from Bloomin' Brands.
Goldman Sachs also addressed the financial implications of Bloomin' Brands' proposed sale of a significant portion of its Brazil operations. The firm's scenario analysis suggests that the deal could result in a downside to net income projections for fiscal year 2025 by 9% to 3%. This is attributed to the shift from a company-operated model to a franchised model for the Brazil operations. Despite these challenges, the company maintains a notable 7.43% dividend yield, although investors should note that the company's current ratio of 0.31 indicates potential liquidity concerns.
The firm stated it would reassess its stance on Bloomin' Brands should there be an improvement in same-store sales growth (SSSG) trends or if the company makes faster-than-anticipated progress on its new strategic initiatives. Until then, the outlook remains cautious, with the current price target reflecting the anticipated challenges ahead.
In other recent news, Bloomin' Brands reported a decline in its fiscal third-quarter 2024 revenue and earnings per share (EPS).
The company's Q3 revenues fell by 4% year-over-year to $1 billion, with adjusted diluted EPS dropping from $0.41 in 2023 to $0.21. This comes amidst strategic changes such as the appointment of Mike Spanos as the new CEO and a re-franchising transaction in Brazil.
Analysts from BMO Capital and Piper Sandler have respectively maintained their Market Perform and Neutral ratings on Bloomin' Brands, but reduced their price targets from $20.00 to $16.00 following these results. Investors are now awaiting details on the Outback U.S. brand and potential changes in capital allocation, expected to be revealed in the fourth-quarter 2024 earnings call.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.