A Rally Is Blossoming For Bloomin’ Brands
Bloomin’ Brands (NASDAQ: BLMN) is in the midst of a major rally driven in part by the Q4 results, a 17% short interest, increasingly bullish analysts' sentiment, and massive institutional buying that we see taking the stock up triple digits. The stock is only trading at 10X its earnings with clear tailwinds in the business. Not only are the comps still good for this sector but the efforts taken over the past year are accelerating top-line results and helping to keep down costs. In our view, results are only going to continue to accelerate with the decline of COVID, the next wave of economic reopening, and the onset of warm weather.
“Q4 was another quarter of strong results with significant sales, margin, and earnings growth,” said David Deno, Chief Executive Officer. “Over the past year, we executed against our strategy resulting in sustained gains in off-premises, higher digital engagement, and improved operational efficiencies in the restaurants. As we move into 2022 we are well-positioned to deliver on our long-term goals of growing sales and maximizing total shareholder return.”
Bloomin’ Brands Grows Revenue, Margin, And Earnings
There are 12 analysts covering Bloomin’ Brands and so far 6 have come out with commentary in the wake of the earnings release. Those include 5 price target increases and 1 decrease (to $30) which put the Pricetargets.com consensus price target at $31.09. This is more than 25% above the current price action and we see it moving higher still as we get into fiscal 2022 results. In regards to the institutions, they purchased more than 30% of the company in the first 7 weeks of 2022 and hold 96% of the shares, numbers that convince us this rally is real.
The Q4 results were impressive as a whole but it is the margin that really counts. The $1.05 billion in net revenue is up 29.2% from last year and beat the consensus by 96 basis points but the adjusted earnings of $0.60 are up from $0.02 from last year and beat by 1500 basis points. Strength was driven by a 20.7% comp at Outback that was bolstered by a 7.9% gain across the rest of the company’s footprint.
The best news, however, is in the guidance which is, ultimately mixed in relation to the analyst's outlook. The company is looking for revenue of $4.35 billion at the top end of the range compared to the $4.36 billion consensus with adjusted earnings of $2.35 at the low end compared to $2.32. In our view, the company’s guidance for revenue is on the light side and should result in outperformance in revenue, margin, and earnings.
Bloomin’ Brands Sprouts A Capital Return Program
Bloomin’ Brands not only put in a great quarter but it also reinstated the dividend and initiated a share repurchase program. The dividend is worth more than 2.25% in yield with shares near $25 and we see it rising by the end of the year. The payout is only 70% of the last payout before the pandemic forced its suspension and the payout ratio for compared to Q4 results is a low 23%. As for the repurchase program, it’s worth $125 million over the next year or roughly 5.8% of the market cap.
The Technical Outlook: Bloomin’ Brands Is Reversing Course
The chart of Bloomin’ Brands is interesting because it shows a massive reversal pattern that took place over the course of nearly 4 months and includes a total of three distinct bottoms and reversals. The greater pattern is a Head & Shoulders in which the head is itself a Head & Shoulders and that is followed up by a Double-Bottom with the right shoulders. In our view, this is strong technical action that has resulted in a break above the neckline at $23.70 and confirmed the larger pattern and restaurant reversal.
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