It's been a mediocre week for Denny's Corporation (NASDAQ:DENN) shareholders, with the stock dropping 13% to US$8.96 in the week since its latest third-quarter results. It looks like a credible result overall - although revenues of US$72m were what the analysts expected, Denny's surprised by delivering a statutory profit of US$0.10 per share, instead of the previously forecast loss. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the consensus forecast from Denny's' seven analysts is for revenues of US$392.7m in 2021, which would reflect a major 22% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 127% to US$0.43. In the lead-up to this report, the analysts had been modelling revenues of US$400.0m and earnings per share (EPS) of US$0.47 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$13.17, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Denny's, with the most bullish analyst valuing it at US$17.00 and the most bearish at US$10.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Denny's shareholders.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. For example, we noticed that Denny's' rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 22%, well above its historical decline of 0.4% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 22% per year. So it looks like Denny's is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$13.17, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Denny's going out to 2022, and you can see them free on our platform here..
Before you take the next step you should know about the 5 warning signs for Denny's (1 is potentially serious!) that we have uncovered.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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