With Bonefish Grill and Carrabba’s Lagging, Bloomin’ Brands Desperately Needs to Upgrade the Menu

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Bloomin’ Brands Inc. (BLMN) looks set for a good year in 2017. The share price bounced around a bit in 2016, usually in response to the company’s quarterly reports. When earnings per share or revenue miss Wall Street’s expectations, a pullback is inevitable. That’s what happened to Bloomin’ Brands after the second quarter report was posted at the end of July 2016. After the report, share price dropped 5%.

At the end of October 2016, the company reported earnings for the third quarter. Revenue topped analysts’ expectations, hitting $1.01 billion; and earnings per share hit the bull’s eye at $0.2. For the fourth and current quarter, analysts are forecasting earnings per share to be $0.33, with revenue at $1.03 billion.

For the first quarter of 2017, analysts’ expectations are loftier, predicting earnings per share of $0.53. If the company meets or beats this prediction, the share price should jump up. Right now, shares are trading at $18.94, up 1.50%. The median target price, according to analysts, is $20.74, with the high being $25.

It’s always informative to look at a company’s long-term performance. Over the last five years, Bloomin’s earnings per share increased 15%; whereas the company’s earnings per share over the next five years forecasts to be in the 11% range. And 2017’s earnings per share should be at 10.6%. In other words, Bloomin is expected to grow steadily through 2022.

At the end of September 2016, Bloomin’ Brands had 648 Outback Steakhouse locations, 196 Bonefish Grill locations and 243 Carrabba’s Italian Grill locations. Bloomin’s lingering problem is that Bonefish Grill and Carrabba’s have not met margin expectations. This means the company’s Outback locations have had to take up the financial slack. Moreover, Outback’s distinctive qualities are maturing. It’s time for Bloomin’ to update the menus and ambience, if the company doesn’t want to become obsolete.

Bloomin’ franchised its restaurants in South Korea during 2016, and I wouldn’t be surprised to see them do the same thing with Carrabba’s and Bonefish Grill. In fact, there is a strong case for spinning off or selling those locations.

Still, with the recent election results and the outlook for a stronger economy, Bloomin’ should continue steady growth. Investors should look for higher earnings per share during the first quarter of 2017, along with increased revenue, and stable growth into 2018. It is doubtful that the company’s yearly dividend yield of 1.5% will increase, but at least it won’t drop.

Randy Radic covers public food stocks for the Exception Magazine.

Image via Bloomin’s Outback Instagram page.