DineEquity (DIN) Q3 Earnings Beat, Sales Miss, Stock Down

DineEquity, Inc. (NYSE:DIN) reported third-quarter fiscal 2016 earnings of $1.46 per share, beating the Zacks Consensus Estimate of $1.39 by 5%. Moreover, the figure increased 2.1% from the prior-year quarter earnings of $1.43, on the back of lower share count.

Total revenue of $156 million declined nearly 4% year over year due to lower Franchise and restaurant, Rental as well as Financing revenues. Revenues also missed the Zacks Consensus Estimate of $160 million by over 2%.

Notably, the company operates under the Applebee's Neighborhood Grill & Bar and International House of Pancakes (IHOP) brands.

DineEquity’s shares declined over 2% in yesterday’s trading session due to soft revenues given a domestic system-wide comps decline at both IHOP and Applebee.

Behind the Headline Numbers

IHOP's domestic system-wide comps decreased 0.1%. This compares unfavorably with the prior-quarter comps growth of 0.2%. Notably, after posting 13 consecutive quarter of comps growth, this was the first quarter of comps decline at IHOP. Nonetheless, the company hopes to boost the brands’ comps through menu innovation and remodeling.

Applebee's domestic system-wide comps declined 5.2% compared with the prior-quarter comps decline of 4.2%. Notably, Applebee’s casual dining restaurants are facing stiff competition from fast-food and quick service restaurants. Nonetheless, the company is taking steps to revitalize the Applebee brand. Increased focus on food and menu innovation, guest satisfaction and marketing are expected to improve comps over the long term.

Fiscal 2016 Outlook

Applebee's domestic system-wide comps are now expected to decline 4–5% (a decline of 3% to 4.5% expected previously).

IHOP's domestic system-wide comps are expected to be near the lower end of the guidance range of 0.5% to 2%.

DineEquity now expects general and administrative expenses to range between $150 million and $154 million ($154–$158 million expected previously).

Meanwhile, the company reiterated its capital expenditure outlook at approximately $8 million.

Zacks Rank & Stocks to Consider

DineEquity has a Zacks Rank #4 (Sell). Better-ranked stocks in this sector include Domino's Pizza, Inc. (NYSE:DPZ) , Darden Restaurants, Inc. (NYSE:DRI) and The Wendy's Company (NASDAQ:WEN) . While Domino’s sports a Zacks Rank #1 (Strong Buy), Darden and Wendy's carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Domino’s 2016 earnings moved up 2.4% over the last 60 days. Meanwhile, for full-year 2016, EPS is expected to improve 22.8%.

The Zacks Consensus Estimate for Darden’s fiscal 2017 earnings climbed 1.3% over the last 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in all the last four quarters, with an average beat of 9.32%.

Wendy’s earnings surpassed the Zacks Consensus Estimate in all the last four quarters, with an average beat of 29.01%. Further, for 2016, EPS is expected to grow 21.2%.

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