UBS Say Pay Up for Dunkin' Brands (DNKN) Visible and Consistent EPS Growth

January 29, 2013 11:51 AM EST
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Price: $51.44 +0.82%

Rating Summary:
    9 Buy, 23 Hold, 5 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 24 | Down: 17 | New: 14
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UBS raised estimates and its price target on Dunkin' Brands (NASDAQ: DNKN) from $36 to $40. 2013 and 2014 EPS estimates were raised from $1.51 and $1.78 to $1.53 (+20% YOY) and $1.82 (+19% YOY). The firm reiterated a Buy rating.

The analyst comments, "Our new estimates and target inch us closer to our original upside case. With our new target, we assume an 18% EPS growth rate over the next 3 years due to accelerated unit growth, and impending customer loyalty/ mobile payment initiatives. We continue to believe investors will be willing to pay a premium multiple for companies that exhibit such highly visible and consistent EPS growth."

The firm also notes faster than expected acceleration of unit development, with the company poised to each its stretch goal of 5% unit growth perhaps as early as this year.

UBS sees SSS drivers from innovation, customer loyalty, and digital. "Having seemingly survived the coffee push of the top breakfast sandwich seller, McDonald's, it appears that Dunkin' is having success expanding upon its line-up of breakfast sandwiches," the analyst comments. "Additionally, Dunkin’ is in the very early stages of its digital and customer loyalty Initiatives. Our analysis suggests that about half of the 3pp+ SSS gap between Starbucks' domestic growth and that of Dunkin' can be explained by the success of Starbucks' "My Starbucks Rewards" program."

For an analyst ratings summary and ratings history on Dunkin' Brands click here. For more ratings news on Dunkin' Brands click here.

Shares of Dunkin' Brands closed at $36.55 yesterday.

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