RBC Capital Downgrades Dunkin' Brands (DNKN) to Sector Perform
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RBC Capital downgraded Dunkin' Brands (NASDAQ: DNKN) from Outperform to Sector Perform with a price target of $54.00 (from $51.00).
Analyst David Palmer commented, "We are downgrading Dunkin' Brands stock from Outperform to Sector Perform. As the shares have appreciated ~21% YTD, outperforming the S&P 500 and our coverage universe (market-cap weighted) by 17pp and 23pp, respectively, we believe the implied return by our new $54 price target is more representative of a Sector Perform rating. We are increasing slightly our Dunkin’ US 3Q16 SSS growth estimate of 1% to 1.5% (cons. 1.2%) but trimming our 4Q SSS to 1.5% from 2% (cons. 1.8%). Our 3Q16e is now $0.59 (+12% YOY; cons. $0.58) and our 2016e EPS remains $2.20 (15% YOY; cons. $2.21), which includes the benefit of a 53rd week. For 2017, we continue to forecast Dunkin' US SSS growth of 1.5% and EPS of $2.40 (+9% YOY; cons. $2.43). We are slightly raising our 2018e EPS to $2.73 (+14% YOY; prior $2.69; cons. $2.75) to account for RBCe $150mm (prior $50mm) in share repurchases. Our higher price target of $54 (increased from $51) equates to ~20x our 2018e EPS (and ~14x EV/EBITDA ’18e)."
Shares of Dunkin' Brands closed at $51.33 yesterday.
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