Denny's (DENN - Free Report) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this restaurant operator, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For Denny's, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The company is expected to earn $0.17 per share for the current quarter, which represents a year-over-year change of -5.56%.
Over the last 30 days, one estimate has moved higher for Denny's compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 6.25%.
Current-Year Estimate Revisions
The company is expected to earn $0.61 per share for the full year, which represents a change of -10.29% from the prior-year number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Denny's. Over the past month, one estimate has moved higher compared to no negative revisions, helping the consensus estimate increase 6.09%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Denny's currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Denny's shares have added 9.1% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.