It's shaping up to be a tough period for Denny's Corporation (NASDAQ:DENN), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$116m, statutory earnings missed forecasts by an incredible 55%, coming in at just US$0.07 per share. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Denny's after the latest results.
Following last week's earnings report, Denny's' eight analysts are forecasting 2024 revenues to be US$460.6m, approximately in line with the last 12 months. Statutory earnings per share are predicted to climb 17% to US$0.43. In the lead-up to this report, the analysts had been modelling revenues of US$468.1m and earnings per share (EPS) of US$0.55 in 2024. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$10.00, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Denny's analyst has a price target of US$15.00 per share, while the most pessimistic values it at US$8.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
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. One thing stands out from these estimates, which is that Denny's is forecast to grow faster in the future than it has in the past, with revenues expected to display 2.3% annualised growth until the end of 2024. If achieved, this would be a much better result than the 1.0% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 9.6% annually for the foreseeable future. So although Denny's' revenue growth is expected to improve, it is still expected to grow slower than the 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. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Denny's' revenue is expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Denny's going out to 2026, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Denny's (at least 2 which shouldn't be ignored) , and understanding these should be part of your investment process.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com