Stock Story -
What Happened: Shares of diner restaurant chain Denny’s (NASDAQ:DENN) fell 10% in the morning session after the company reported second-quarter earnings results, with its EPS and revenue missing Wall Street's estimates.
Management hinted at competitive concerns, adding, "Despite these results and staying ahead of the competition, we know the overall industry is pressured, and therefore, we have updated our guidance accordingly." As a result, the company lowered domestic system-wide same-restaurant sales forecast for the full year to between (1%) and 1% (vs. previous projection of between 0% and 3%). Similarly, adjusted EBITDA was lower to between $83 million and $87 million (vs. the previous estimate of between $87 million and $91 million). Overall, this quarter could have been better.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Denny's? Find out by reading the original article on StockStory, it's free.
What is the market telling us: Denny's's shares are somewhat volatile and over the last year have had 7 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock dropped 8.5% on the news that the company reported fourth-quarter results with revenue, adjusted EBITDA, and EPS, missing analysts' expectations. Guidance was tepid as well, with full-year adjusted EBITDA guidance below expectations. Also, the full-year domestic system-wide same-restaurant sales guidance points to a growth deceleration at 0% -3% (vs. 3.6% growth in 2023).
On the other hand, Same-store sales and gross margin beat. Zooming out, this was a mixed but weaker quarter.
Denny's is down 32.6% since the beginning of the year, and at $7.29 per share it is trading 38% below its 52-week high of $11.76 from July 2023. Investors who bought $1,000 worth of Denny's's shares 5 years ago would now be looking at an investment worth $322.71.