NEW YORK (TheStreet) -- Shares of Dunkin' Brands Group Inc. (DNKN - Get Report) are down -2.03% to $43.00 in pre-market trading on Friday after Janney Capital downgraded the donut maker to "neutral" from "buy" and lowered its price target to $45 from $56.
Janney Capital said growing risks for Dunkin' Donuts' domestic same store sales trends for the rest of the fiscal year may fall short of current expectations.
Separately, TheStreet Ratings team rates DUNKIN' BRANDS GROUP INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DUNKIN' BRANDS GROUP INC (DNKN) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and unimpressive growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 6.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, DUNKIN' BRANDS GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for DUNKIN' BRANDS GROUP INC is currently very high, coming in at 77.25%. Regardless of DNKN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.35% trails the industry average.
- The change in net income from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income has decreased by 3.5% when compared to the same quarter one year ago, dropping from $23.80 million to $22.96 million.
- The debt-to-equity ratio is very high at 4.63 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, DNKN maintains a poor quick ratio of 0.97, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: DNKN Ratings Report