Bloomin' Brands Edges Out Expectations, Looks Forward to Future

Bloomin' Brands Inc. (NASDAQ: BLMN) demonstrated a point with its recent earnings report that most of us have known, at least anecdotally, for a while now: 2020 was a terrible year for restaurants. The fourth quarter saw improvement for many brands as lockdowns relented, or otherwise were restarted, and for Bloomin' Brands, its results followed the combination of a hopeful return to the tables and occasional lockdowns we saw throughout the country.

A Win, If Only Just

Bloomin' Brands turned in what amounted to a breakeven quarter, reports noted, with a very small loss of $14.2 million effectively working out to a minimal number on a per-share basis. Given that some reports were projecting a loss of $0.02 for the quarter, that's still a win, if one of the worst kinds.

Revenue, meanwhile, didn't turn out so well, either. Revenue came in at $812.5 million for the quarter, but the Zacks consensus was looking for $848.1 million. The full-year figures didn't fare much better, as reports noted Bloomin' Brands turned in a loss of $158.7 million for the year against total revenue of $3.17 billion.

Word from CEO David Deno, however, was surprisingly upbeat in the face of a victory snatched from the jaws of defeat. Deno noted that the company has been staging several initiatives designed to improve pretty much everything that's gone wrong this year, including covering its debts, improving its cash flow, and getting its margins back up to snuff. With even the most severe lockdown-carrying states now seems eager to get diners back in restaurants, however, Deno's remarks carry a little extra weight.

Analysts Are Ready for Another Round

While the recent earnings report might seem like a cause for pessimism, the broader analyst pool disagrees. Our latest research finds that not only is sentiment trending a bit more bullish, but it's been pretty high, to begin with for the last six months.

Six months ago, sentiment was almost evenly split on Bloomin' Brands, with seven “hold” ratings and eight “buy” ratings. That adjusted in a big way three months ago, as the ratios shifted to five “hold”, nine “buy” and one “strong-buy”. Another tectonic shift hit a month ago, as one “sell” rating stepped in and the “strong-buy” departed the field, with five “hold” and nine “buy” ratings remaining static. Now, once again, another major shift hit as we stand at one “sell”, five “hold”, eight “buy” and one “strong-buy” again.

The price target, meanwhile, has been trending steadily upward in that whole interval. Six months ago, it stood at $14.20 per share, before jumping to $17.27 three months ago. A month ago, another jump hit but a much smaller one as the target rose to $17.47 per share. Now, we stand at $18.17, which represents downside potential for the first time in the last six months. With the company's shares currently selling at $23.50, things are looking up for the company.

A Recovering Restaurant Scene

The good news for restaurants is that it's hard to imagine how 2021 can be worse than 2020 in terms of overall operations. Sure, some places barely have their restaurants back open, running at 25% capacity, but that's certainly better than the nothing that was allowed even just a few months prior. Plus, restaurants have been working to adapt to increasing take-out trade, which has delivered some noteworthy results. Reports suggest that Bloomin' Brands is already testing a “ghost kitchen” in Birmingham known as “Tender Shack” that works as a delivery-only restaurant with a very limited menu. Apparently, the concept worked so well in Tampa—Bloomin's hometown—that the company looked to expand from there. Additionally, reports suggest the delivery-only market is showing some life; Chili's, a Brinker International (NYSE:EAT) property, for example, says that the “It's Just Wings” imprint is on track to bring in $150 million in annual sales.

With in-person dining making a comeback, this only improves the situation further. The restaurants are better prepared for further shutdowns, should those become necessary—between COVID-19 therapeutics, vaccines, and declining numbers in many places, however, this looks unlikely—and should they not, the delivery imprints can supply new cash flow options, which should improve bottom lines. Admittedly, as ever, Bloomin' Brands will have plenty of competitors waiting in the wings to scoop up some of that returning-to-the-restaurant market share. Focusing on competitive edges now will likely pay substantial dividends in the near-term.

So yes, Bloomin' Brands had a rough quarter and a terrible 2020. There are plenty of signs to suggest that improvement is not only likely but almost certain; the notion that it could get much worse is a long shot at best.