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Bear of the Day: DineEquity (DIN)

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It has been an extremely rough stretch for companies in the restaurant space.

Competitive pressures have been increasing, and it is clear that consumer tastes are changing as well. So, for companies representing the old guard of the restaurant chain world, such as DineEquity ((DIN - Free Report) ) and its IHOP and Applebee’s brands, it has been an especially difficult time.

But the pain might not be ending just yet, as companies like DineEquity make actually have some more weakness in their near future. This is especially clear if we look to recent earnings estimate revisions for a guide to how DIN stock may be positioned for the months ahead.

Recent Estimates

Despite a recent earnings beat, things are not looking good for DIN shares. The company saw earnings slump by over 18% when compared to the year ago period, while revenues declined and missed estimates on top of that.

The company also revised its comps forecast lower, and is looking for a decline of 6%-8% for its Applebee’s brand this year. Add this to the fact that the company is looking to close more restaurants—for both its IHOP and Applebee’s brands—than first anticipated, and you don’t exactly have a recipe for stock success.

No wonder analysts have been slashing their estimates as of late. The current quarter consensus has fallen from $1.20/share 60 days ago, to just 88 cents a share now. The current year and following year consensus estimates have also been on the move lower, falling a double-digit percentage level in the same time frame.

DineEquity, Inc Price and Consensus

DineEquity, Inc Price and Consensus | DineEquity, Inc Quote


With figures like this, a competitive environment, and more store closings, it shouldn’t be a surprise that DIN has fallen to a Zacks Rank #5 (Strong Sell), and that we are looking for more weakness from the company in the near future.

Other Choices

DIN is clearly facing a rough time, so what are some better choices out there? One that might be worth watching in the near term is Dave & Buster’s ((PLAY - Free Report) ). Not only is this a Zacks Rank #2 (Buy) stock, but it has a VGM score of ‘A’ as well.

PLAY is also growing earnings at an impressive rate, while it has a PEG below two as well. It might be worth watching in the restaurant world in the near-term, and especially when compared to DIN, so long as the earnings estimates remain weak for that troubled restaurant company.

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