Dunkin’ Brands Group, Inc. :DNKN-US: Earnings Analysis: 2016 By the Numbers : February 13, 2017

Dunkin’ Brands Group, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Dunkin’ Brands Group, Inc. – Panera Bread Company Class A, McDonald’s Corporation and Starbucks Corporation (PNRA-US, MCD-US and SBUX-US) that have also reported for this period.

Highlights

  • Gross margins widened from 74.52% to 76.94% compared to the same period last year, operating (EBITDA) margins now 52.29% from 49.69%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 828.89 810.93 748.71 713.84 658.18
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 195.58 105.23 176.36 146.9 108.18
Earnings Growth (YOY) 85.86 -40.33 20.05 35.8 214.08
Net Margin 23.59 12.98 23.55 20.58 16.44
EPS 2.11 1.08 1.65 1.36 0.93
Return on Equity N/A 136.47 44.8 38.54 19.74
Return on Assets 6.09 3.3 5.48 4.52 3.33

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Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 74.52% to 76.94% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 49.69% to 52.29% compared to the same period last year. For comparison, gross margins were 74.52% and EBITDA margins were 49.69% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

DNKN-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 70.72, compared to last year’s level of 50.89 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 44.11% to 47.16% and (2) one-time items. The company’s pretax margins are now 37.79% compared to 24.86% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Dunkin’ Brands Group, Inc.

Company Profile

Dunkin Brands Group, Inc. operates as a franchisor of quick service restaurants, serving hot and cold coffee and baked goods, as well as hard serve ice cream. It operates through four segments: Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins International and Baskin-Robbins U.S. The company operates franchise restaurants under Dunkin’ Donuts and Baskin-Robbins brands. The Baskin-Robbins brand include hard-serve ice cream, soft serve ice cream, frozen yogurt, shakes, malts and floats. The Dunkin’ Donuts brand includes coffee, donuts, muffins, bagels and breakfast sandwiches. Dunkin Brands Group was founded on November 22, 2005 and is headquartered in Canton, MA.

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