Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Bloomin' Brands Stock Surged Today

By Jeremy Bowman - Nov 6, 2019 at 7:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the Outback Steakhouse parent jumped as the company said it was exploring a potential sale.

What happened

Shares of Bloomin' Brands ( BLMN -1.07% ) were moving higher today after the parent of Outback Steakhouse posted better-than-expected results in its third-quarter earnings report and said it would explore strategic options, including a sale of the company.

As a result, the stock finished today's session up 11.1%.

The exterior of an Outback restaurant

Image source: Outback Steakhouse.

So what

The casual-dining chain said comparable sales at its U.S. locations fell 0.2% in the quarter, but that Outback Steakhouse comps spiked 11.2% in Brazil, showing its potential in international markets.  

Overall revenue ticked up 0.2% to $967.1 million, better than expectations at $965.7 million. Adjusted earnings per share increased from $0.08 to $0.10, matching analyst estimates. 

CEO David Deno said the company had moderated its price increases to strengthen its value proposition against competition, which has led to October comps that outpaced the industry. He also underscored improvements in the company's operating margin.   

However, what really seemed to drive the stock higher was management's announcement that it was exploring strategic alternatives to maximize shareholder value, including a potential sale. Deno argued that despite efforts that "have created significant market share gains and enhanced profitability," the company believes the current stock price doesn't reflect its value.

Bloomin' Brands has retained Bank of America as its financial advisor in the matter.

Now what

Bloomin's decision to pursue strategic alternatives may not necessarily lead to a sale. The company is currently trading at a P/E of 15, cheaper than some of its restaurant stock  peers but not necessarily a bargain for a slow-growth company. The restaurant operators could sell one or more of its sub-brands, which include Carraba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse & Wine Bar, or it could accelerate its share buyback program, a common move when management believes its stock is undervalued.

Meanwhile, the company is still committed to its business plan and maintained its full-year guidance at $1.53-$1.61, but it lowered its comparable sales forecast from 2%-2.5% to 1.5%.

Management said it planned to explore its options in a timely manner, so we could hear an update within the next few months.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bloomin' Brands Stock Quote
Bloomin' Brands
BLMN
$17.48 (-1.07%) $0.19
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$43.63 (-1.89%) $0.84

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
656%
 
S&P 500 Returns
144%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.