When Truist Financial Corp. downgraded the stock of Dine Brands Global Inc. early this month, it resulted in a decline in share price for the Pasadena restaurant chain franchiser.
Before the market closed on Oct. 3, Jake Bartlett, an analyst with Truist, released his most recent research report on Dine Brands in which he downgraded the shares to hold from buy and cut its price target to $37 from $66.
Dine Brands stock price closed at $33.55 that day and lost about 2% the following day – Oct. 4 – when the shares closed at $32.75.
On Oct. 7 they lost another 7% when the shares closed at $30.48. The stock price then went back and forth between gains and losses before settling at $32.61 on Oct. 16. That price represents an almost 31% decrease since it closed at an adjusted amount of $47.08 on Jan. 2.
Dine Brand shares closed at $33.03 on Oct. 17.
Dine Brands owns the IHOP, Applebee’s Neighborhood Grill + Bar and Fuzzy’s Taco Shop brands and uses franchisees to open store locations.
In his report, Bartlett said that Truist’s credit card-tracking data showed that Applebee’s same-store sales slowed in August and September, despite sales-boosting efforts.
That concerning trend would come as “particularly disappointing,” given that some other chain restaurants have improved in recent months, Bartlett wrote.
“With Applebee’s value promotions and new marketing apparently falling flat with consumers, we have less confidence in positive same store sales catalysts over the next few quarters,” Bartlett said in the report.
Earnings reports coming out soon
While IHOP looks to have outperformed Applebee’s over those months, Bartlett wrote that the data still points to Dine Brands potentially missing revenue estimates when it reports earnings for the quarter on Nov. 6.
“We view IHOP as in a stronger competitive positioning than Applebee’s, with a disciplined barbell menu strategy and growing loyalty program but the family dining segment remains challenging,” he said in the report.
He also wrote that the company could cut costs to mitigate the impact slower-than-expected sales would have on profit margins and said that “pressured sales” could lead to “increased hesitancy to develop new stores and continued elevated store closures.”
Other analyst reacts
It is the exact opposite viewpoint of Wedbush Securities analyst Nick Setyan.
On Oct. 1 he upgraded Dine Brands stock to outperform from neutral.
He also raised his price target from $34 to $47, according to a story at Benzinga, a Detroit-based business and financial news website.
The analyst identified key catalysts for Dine Brands’ multiple expansions over the next 12 months.
According to Setyan, a $100 million accelerated share repurchase plan is likely in the second half of 2025, representing about 20% of the company’s current market capitalization, the Benzinga story added.
The analyst forecasts adjusted free cash flow of $99.2 million this year and $107.5 million next year, the Benzinga story said.
Additionally, the story continued, the firm’s strong free cash flow generation is expected to support ongoing annual repurchases of $60 million after the accelerated share repurchase.
But unlike Bartlett’s report, Setyan’s research note didn’t move the company’s stock price much.
From the close of $34.73 on Oct. 1 – the day he released his report – to the following day’s close of $34.54, the share price only went down by a fraction of a percent.
