Dunkin’ Brands Group, Inc. :DNKN-US: Earnings Analysis: Q4, 2016 By the Numbers : February 10, 2017

Dunkin’ Brands Group, Inc. reports financial results for the quarter 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

  • Summary numbers: Revenues of USD 215.71 million, Net Earnings of USD 56.12 million.
  • Gross margins widened from 74.70% to 79.39% compared to the same period last year, operating (EBITDA) margins now 55.13% from 52.74%.
  • 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:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 215.71 207.1 216.31 189.78 203.8
Revenue Growth (%YOY) 5.84 -1.29 2.31 2.08 5.48
Earnings (mil) 56.12 52.71 49.59 37.15 -8.94
Earnings Growth (%YOY) 727.88 14.06 17.18 44.96 -117.02
Net Margin (%) 26.02 25.45 22.93 19.58 -4.39
EPS 0.61 0.57 0.54 0.4 -0.1
Return on Equity (%) N/A N/A N/A N/A N/A
Return on Assets (%) 7.04 6.72 6.37 4.72 -1.09

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Market Share Versus Profits

Revenues History
Earnings History

DNKN-US‘s change in revenue this period compared to the same period last year of 5.84% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that DNKN-US is holding onto its market share. Also, for comparison purposes, revenues changed by 4.16% and earnings by 6.47% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 74.70% to 79.39% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 52.74% to 55.13% compared to the same period last year. For comparison, gross margins were 77.60% and EBITDA margins were 53.97% 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 improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 76.72 days from 94.83 days for the same period last year.

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 47.13% to 50.29% and (2) one-time items. The company’s pretax margins are now 40.35% compared to 9.21% 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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