Digital Investments And International Expansion Will Unlock New Potential

Key Takeaways

• Aggressive menu optimization, tech-driven operations, and a cultural leadership shift position the company for sustained margin expansion and consistent long-term earnings growth.
  
• Expanded digital channels and evolving premium offerings align with younger diners' preferences, supporting faster, more profitable growth and increased discretionary spending per customer.
  
• Reliance on in-restaurant dining and brand fatigue amid consumer shifts threaten long-term growth, while continued cost inflation pressures margins and recovery efforts face execution risks.

Catalysts

Through its subsidiaries, owns and operates casual, polished casual, and fine dining restaurants in the United States and internationally.

• Analyst consensus sees menu simplification as a moderate driver of operational efficiency and cost savings, but they likely underestimate the long-term magnitude-continued aggressive menu optimization and AI-backed labor scheduling could produce industry-leading margin expansion, not just incremental improvement.
  
• While analysts broadly highlight refranchising (particularly Brazil) as a source of royalty streams and stability, they may be missing the earnings power unleashed by a leaner, capital-light international portfolio-Bloomin' Brands' systematic redeployment of resources could result in faster, more profitable U.S. and global growth, driving significant accretion to net income and return on capital.
  
• Massive investments in digital channels, proprietary delivery, and AI-powered guest insights directly align with escalating consumer preference for convenience; as off-premise sales stabilize well above 20% of mix, further growth here could drive a step-change in sales volume and structurally boost revenue and margin due to higher digital engagement.
  
• Leadership overhaul, including new executive hires with proven backgrounds in transformation, analytics, and operational turnaround, positions the company for a sustained cultural shift; this should translate to consistently improving same-store sales and durable long-term earnings growth.
  
• With strengthening demographic trends-particularly rising demand for premium casual dining among Millennials and Gen Z-Bloomin' Brands' strategic pricing, menu innovation, and experiential offerings are set up to capture increased discretionary spend per customer, supporting outsized same-restaurant sales growth and higher average checks for years to come.

Bloomin' Brands Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Bloomin' Brands compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Bloomin' Brands's revenue will grow by 2.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.0% today to 2.8% in 3 years time.
• The bullish analysts expect earnings to reach $115.9 million (and earnings per share of $1.35) by about August 2028, up from $77.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 11.5x on those 2028 earnings, up from 7.5x today. This future PE is lower than the current PE for the US Hospitality industry at 22.2x.
• Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Bloomin' Brands Future Earnings Per Share Growth

Risks

• Bloomin' Brands recorded U.S. comparable restaurant sales and traffic declines that were worse than the broader industry, and management acknowledged ongoing market share losses and that reversing these trends will take time, signaling ongoing pressure on long-term revenue growth.
  
• Restaurant-level margins decreased 250 basis points year-over-year due to persistent labor inflation, product cost inflation, and insurance/operating expense pressures, with management guiding for continued margin compression due to secular food and wage inflation, negatively impacting long-term net margins and earnings.
  
• The company's heavy reliance on in-restaurant dining, paired with off-premises sales plateauing and secular consumer shifts toward at-home dining and meal delivery, exposes Bloomin' Brands to long-term demand risk that could further suppress same-store revenue and traffic.
  
• Outback, the flagship brand, is in the early innings of a multi-year turnaround effort with significant ongoing investment needs and execution risk; brand fatigue and declining relevance, especially among younger consumers, threaten long-term brand equity and revenue recovery.
  
• Management is pulling back on new restaurant openings in favor of remodels, yet limited evidence of successful international expansion, persistent challenges at Bonefish Grill, and a substantial fixed cost base from physical locations leave the company exposed to negative operating leverage during downturns, risking sustainable earnings and future growth.

Valuation

• The assumed bullish price target for Bloomin' Brands is $11.11, which represents two standard deviations above the consensus price target of $7.96. This valuation is based on what can be assumed as the expectations of Bloomin' Brands's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.0, and the most bearish reporting a price target of just $6.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $4.2 billion, earnings will come to $115.9 million, and it would be trading on a PE ratio of 11.5x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $6.75, the bullish analyst price target of $11.11 is 39.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.