With this report, we upgrade the shares of Dine Brands (DIN) to Buy (from Neutral), as we believe the risk/reward has shifted in favor of longs with the shares having fallen from $94.35 as of June 27th to $68.65 (-27%) as of yesterday’s (October 9th’s) closing price.
With this report, we introduce our quarterly adjusted EPS estimates for 2020E for Dine Brands (DIN; Buy). They are as follows: (1) Q1E $2.05, (2) Q2E $1.95, (3) Q3E $1.85, and (4) Q4E $2.30. These quarterlies sum to our unchanged full-year 2020E adjusted EPS projection of $8.15. Please keep in mind that 2020 is a 53-week fiscal year for Dine Brands.
Given weaker-than-expected same-store sales trends in the family-dining and casualdining sector quarter-to-date, we lower our Q3E same-store sales forecasts for IHOP and Applebee’s (both owned by Dine Brands [DIN; Neutral]). For IHOP, our Q3E samestore sales estimate is reduced by -140 basis points, to +0.8%, which becomes the new “low on the sell-side” forecast, according to Consensus Metrix data. For Applebee’s, we take down our Q3E projection by -150 basis points, to -1.5%, as compared to current sell-side consensus of -1.2%.