Citi has revised its price target for Denny's (DENN, Financial), reducing it from $7 to $6.25 while maintaining a Buy rating on the stock. The adjustment comes as the restaurant chain faces various hurdles, including subdued sales trends and the impact of rising egg prices. Furthermore, Denny's is experiencing a number of store closures, contributing to what Citi describes as "rightfully low" expectations as the company approaches its first-quarter financial results.
Despite these challenges, Citi retains an optimistic outlook on the risk/reward potential of Denny's shares at their current level. This suggests that the firm still sees value in investing in Denny's stock, even amid the prevailing headwinds. Investors will closely watch how the company navigates these difficulties in the upcoming financial reports.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 7 analysts, the average target price for Denny's Corp (DENN, Financial) is $7.50 with a high estimate of $8.50 and a low estimate of $6.00. The average target implies an upside of 121.24% from the current price of $3.39. More detailed estimate data can be found on the Denny's Corp (DENN) Forecast page.
Based on the consensus recommendation from 9 brokerage firms, Denny's Corp's (DENN, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Denny's Corp (DENN, Financial) in one year is $11.81, suggesting a upside of 248.38% from the current price of $3.39. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Denny's Corp (DENN) Summary page.
DENN Key Business Developments
Release Date: February 12, 2025
- Same Restaurant Sales (Denny's): Positive 1.1% for the fourth quarter.
- Same Restaurant Sales (Keke's): Positive 3% for the fourth quarter.
- Average Guest Check Increase: Approximately 6.5% compared to the prior year quarter.
- Off-Premise Sales (Denny's): 21% of total sales in the fourth quarter.
- New Store Openings (Denny's): Four franchise restaurants opened during the quarter.
- Store Closures (Denny's): 30 restaurants closed during the fourth quarter.
- Operating Revenue: $114.7 million for the fourth quarter.
- Adjusted Franchise Operating Margin: $31.9 million or 51.2% of franchise and license revenue.
- Adjusted Company Restaurant Operating Margin: $5.9 million or 11.3% of company restaurant sales.
- Adjusted EBITDA: $22.2 million, an increase of 11.1% year-over-year.
- Adjusted Net Income Per Share: $0.14 for the current year quarter.
- Total Debt Outstanding: Approximately $272 million.
- 2025 Guidance - Same Restaurant Sales: Expected between negative 2% and positive 1%.
- 2025 Guidance - New Store Openings: 25 to 40 restaurants expected to open.
- 2025 Guidance - Store Closures: Expected between 70 and 90 closures.
- 2025 Guidance - Adjusted EBITDA: Expected between $80 million and $85 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Denny's Corp (DENN, Financial) reported positive same restaurant sales growth of 1.1% for Denny's and 3% for Keke's Breakfast Cafe in the fourth quarter of 2024.
- The $2, $4, $6, $8 value menu was a successful initiative, driving traffic and profitability for franchisees.
- Denny's Corp (DENN) outperformed the BBI Family dining sales index for the fourth consecutive quarter.
- The Diner 2.0 remodel program showed a 6.5% lift in traffic at remodeled restaurants, contributing to increased sales and profitability.
- Keke's expanded its footprint from Florida to six different states by the end of 2024, with a record-breaking year for growth.
Negative Points
- Denny's Corp (DENN) experienced a decline in system-wide same restaurant sales at the start of 2025, with a 0.7% decrease in January and a 5% decrease in early February.
- The company anticipates closing between 70 and 90 lower volume Denny's restaurants in 2025 to improve franchisee cash flow.
- Keke's same restaurant sales were impacted by hurricanes in Florida, reducing potential growth.
- Consumer sentiment has shifted due to macroeconomic factors, leading to conservative guidance for 2025.
- New Keke's cafe openings faced operational inefficiencies, impacting overall adjusted company margins by approximately 70 basis points.
