Bloomin’ Brands Inc. NASDAQ: BLMN is among the latest in a series of companies to be getting attention from activist investors who want to see change that would make their shares grow in value.
The stock is currently out of buy range, following a strong rally, but a moving-average pullback could offer the next buy opportunity.
Bloomin’ is the parent company of Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse & Wine Bar and Aussie Grill by Outback.
Small-Cap Dividend Payer
The stock has some unusual characteristics: It’s a small cap, with a market capitalization just shy of $2.6 billion, and it pays a dividend. The Bloomin’ Brands dividend yield is 3.21%.
It’s not very common for a small U.S.-based company to pay a dividend; the practice is more common outside the U.S., where cultural expectations are different when it comes to shareholder return.
Stateside, small-cap stocks often prioritize reinvesting profits for growth rather than distributing dividends. With limited resources and growth potential, smaller companies typically prefer to allocate earnings towards expansion and development as a way of maximizing shareholder value over the long haul.
Activist Investor Gets Two Board Seats
Activist investor Starboard Value has made it clear that it’s interested in maximizing value, perhaps sooner rather than later.
Activist investors are investment groups or firms that purchase significant stakes in companies to influence corporate decisions, often advocating for changes to boost shareholder value or improve governance practices.
Starboard has taken a 9.7% stake in Bloomin’ Brands, and made a deal to name two board members, Starboard partner Jonathan Sagal and former Darden Restaurants Inc. NYSE: DRI chief operating officer David George.
Bloomin’ Brands has also formed a new operating committee, of which Sagal is a member and George chairs.
Activist investors have made themselves known recently at The Walt Disney Co. NYSE: DIS and Etsy Inc. NASDAQ: ETSY, among others.
Breakout From Cup-With-Handle Base
On the Bloomin’ Brands chart, you can see the stock breaking out of a six-week cup-with-handle base on February 12. It pulled back, finding support in the area of its 50-day moving average.
The stock then rebounded, once again clearing the handle buy point above $27.62, and is up 10.23% in the past week.
In fact, the recent breakout was an addition to a broader uptrend that began in mid-November. Bloomin’ Brands Stock is up 6.43% in 2024.
The pace of buying has picked up in recent sessions, as upside trading volume has been significantly higher than average.
Bloomin’ stock is showing technical strength, with the chart pattern and heavy upside volume suggesting that upward momentum is likely to continue.
Stock Rallies After Restaurant Closures
A catalyst for the buying was Bloomin’ Brands' announcement that it was closing 41 restaurants throughout its portfolio. The closures comprised underperforming locations.
Bloomin’ Brands CEO David Deno said the company plans to open 40 to 45 new restaurants this year, offsetting the closures.
The company's non-U.S. business has been growing faster than domestic sales. Earnings were up 17% in 2023, its best net income performance since 2018.
Traffic at the company’s U.S. Outback Steakhouse locations was down in the fourth quarter and the full year of 2023, although 2023 revenue grew by 5.7% to $4.67 billion. Price increases were responsible for that revenue growth.
Restaurant Stocks Outperforming Broad Market
The Bloomin’ Brands earnings data show the company topping earnings views in the most recent quarter, while revenue came up a bit short.
As a group, restaurant stocks have been outperforming the broader market, led by standouts including Wingstop Inc. NASDAQ: WING, Cava Group Inc. NYSE: CAVA and Shake Shack Inc. NYSE: SHAK.
Bloomin’ Brands stock is currently trading above its consensus price target of $27.90, but following the most recent earnings report, some analysts boosted their view. For example, Citigroup increased its target from $25 to $29.
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