Bloomin' Brands (NASDAQ: BLMN) Has Recovery On the Menu

The restaurant sector has been beaten pretty badly by the coronavirus outbreak, which only makes sense when—like a lot of retailers—you're required by government mandate to close most of your storefronts and operate essentially only out of a back room. Bloomin' Brands (NASDAQ: BLMN) is no exception, and worse yet, this one had some pretty hefty downside going into the pandemic. Some of the latest reports, however, suggest that this brand might have some surprise upside potential.

A Fairly Steady Ride Until the Cliff Showed Up

Looking at the one-year chart for Bloomin' suggests surprising stability. Bloomin' spent around nine months trading within what amounts to three ranges. There's a plateau around $17, another plateau around $19, and a third around $22.

This pattern held for the better part of nine months, until the coronavirus outbreak landed on Bloomin's throat like a bird made of lead. The company went from $23.46 on February 23—and might have been preparing for a new plateau—when the bottom fell out and the company dropped to $4.83 on March 20.

Recovery followed, but it wasn't exactly a pronounced recovery, as the company has since been trading in a jittery band between $8 and $15 per share for the last three months.

A Fireball, or an Unexpected Recovery?

After the company spent so long trading within narrow bands that occasionally went upward for so long,

The good news here, if you can call it that, is that the stock price is running about $7 less per share than it was this time last year. Sounds minor, until you consider that that represents a loss of close to 41 percent. That means one of two broad-ranging possibilities: the start of a new beginning, or the beginning of the end.

To that end, some news supports the notion that this is actually the start of a comeback for the brand. Insider activity revealed its CEO, David J. Deno, recently purchased 12,000 shares of Bloomin', a move that suggests he's got sufficient confidence in the stock's return to its former levels to actually put cash down on the deal. Not a lot of cash for a CEO, sure—the buy came out to somewhere around $120,000 and back in 2018 he made almost $2.4 million working there as an executive vice president—but it's a six-figure bet on success nonetheless.

The Engine Looks...Mostly Undamaged?

Now here's where things get interesting. The company last rolled out earnings reports May 8, where it revealed it had matched the Thomson Reuters consensus of $0.14 in earnings per share. The business also destroyed revenue projections, beating estimates of $575.35 million nearly double, coming in at $1.01 billion for the quarter.  However, ratings are heavily weighted toward buy and hold, with just one analyst in 16 suggesting selling off any current holdings of Bloomin'.

Back in June, FSR Magazine declared that the “recovery is in full swing” at the brand, thanks to many dining rooms being able to reopen.  The good news here is that Bloomin' Brands has several restaurants to its credit, including Outback Steakhouse—home of the trademark appetizer the Bloomin' Onion—and Carrabba's Italian Grill, along with lesser-known brands Bonefish Grill and Fleming's. That's a lot of different tastes to cover, even if they're in somewhat competitive circles. More than one has accused Carrabba's, for example, of being little more than an Olive Garden knockoff, and comparisons between Bloomin' brands and Darden brands don't stop there. However, the advantage of diversified brands is that the largest range of customers can be reached; no matter what you're hungry for, chances are a Bloomin' brand has it on the menu.

It's worth considering, though, that there's very real potential that Bloomin' Brands may not be allowed to try and make a comeback. With coronavirus cases surging in many states in the US, the possibility for further lockdowns emerges. Sure, the death count is mostly flat and dropping in many of those surges, but how much that truth will matter to local officials terrified of looking like Mayor Vaughn from “Jaws” isn't certain. Restaurants can't hold out long without their dining rooms; some much more so than others, of course, but we've seen enough permanent closures to know that the coronavirus is just as much a business killer as it is anything else.

There's plenty of risk in Bloomin' Brands right now, but that risk seems to have been priced into its currently-diminished share price, which is, again, down 41 percent against this time last year. It may be, therefore, a good time to show this diversified chain restaurant umbrella some love, and maybe stop in sometime.