Dine Brands (DIN) is trading up 20% at a 52-week high after the company reported upside fourth quarter results and guided fiscal 2018 earnings above estimates this morning.
Dine Brands, formerly known as DineEquity, owns Applebee's and IHOP restaurants.
Both brands reported sequential improvement in the fourth quarter. Applebee's domestic system-wide comparable same-restaurant sales increased 1.3%, the best result in over two years, versus a 7.7% decline in the third quarter. IHOP's domestic system-wide comparable same-restaurant sales modestly declined 0.4% versus a 3.7% decline last quarter.
Fourth quarter adjusted earnings fell by almost 50% year-over year to $0.74/share, but that was better than expected. Gross profit fell due to an increase in franchisor contributions to the Applebee's national advertising fund, higher bad debt expense, a reduction in revenue recognized due to the non-collectability of Applebee's franchisee royalties and the impact of restaurant closures.
Dine Brands called for both Applebee's and IHOP's domestic system-wide comparable same-restaurant sales up 0-3% in fiscal 2018. Applbee's comps fell 5.3% in 2017 while IHOP's comps fell 1.9%.
The company called for adjusted EPS of $4.95-5.25, which was ~15% above consensus at the midpoint.
The company also cut its dividend 35% quarter-over-quarter to $0.63/share. CEO Stephen Joyce: "We are focused on returning to a growth company and delivering strong returns to our shareholders. We believe the change in our quarterly dividend to a more appropriate dividend yield will result in a favorable capital allocation framework and provide us the opportunity for meaningful share repurchases, investments in our brands as well as opportunities to scale our business. I am very confident that the steps we are taking will drive sustainable results as we continue to build on the encouraging positive same-restaurant sales and traffic performance of both brands in January."
The Company will discuss certain long-term financial projections, business strategy and corporate rebranding during its investor and analyst day tomorrow, February 21, in New York City.