Tuesday was an interesting day for restaurant name Bloomin' Brands Inc. (BLMN) , which reported fourth-quarter earnings prior to the market open.
The early read was for a down day for Bloomin' in light of top- and bottom-line quarterly misses, with earnings coming in at 32 cents a share versus the 35-cent consensus and revenue that was shy by $10 million. On top of that, operating margins slipped 80 basis points. However, Bloomin' shares actually rose 3.5% in a modestly down day for the markets.
As it turns out, there was some good news in the earnings release. Same-store sales companywide were up 1.9%, with Outback Steakhouse (up 2.7%) leading the way in the U.S. The company also issued earnings guidance for 2020 in the range of $1.85 to $1.90 a share; that was well ahead of the previous $1.72 consensus estimate, which since has risen to $1.82 a share.
Perhaps most surprisingly, Bloomin' Brands doubled its quarterly dividend to 20 cents, which implies a 3.6% dividend yield. Over the past year Bloomin' also has reduced shares outstanding by about 5%, and while the company stated that it will continue to buy back shares that effort will be muted by the dividend increase and a potential paying down of debt.
The issue now for Bloomin' centers on activist investor Jana Partners and that firm's stated intention to nominate two or perhaps three directors for election to the company's board at the 2020 annual meeting. Jana owns 7.4% of Bloomin's and is pushing for change at the company, and I'm not sure how the dividend increase fits. One thing is certain: Bloomin' is no stranger to activist influence, and it will be interesting to see how this plays out.
Elsewhere in Smallville, net/net CPI Aerostructures Inc, (CVU) , a former holding, is learning the hard way what can happen when accounting errors force a company to restate financial statements. Last Friday the maker of aircraft parts announced that it will be restating 2018 and previously reported 2019 financial results due to errors the company made in recognizing contract revenue. CPI Aerostructures said it believes revenue may have been overstated. Three days prior to this announcement, the company's chief financial officer resigned.
All the uncertainty has pushed shares down 37% in the past two trading days. Whether that's an overreaction remains to be seen, but the company isn't one I want to be involved with, at least at this point. CVU seemingly trades at less than 10x trailing earnings and 0.62 X net current asset value (NCAV), but with restatements on the horizon that will affect both the income statement and balance sheet, that data can't be trusted.
