Why Dine Brands Global, Inc. Stock Gained 37.2% in February

MarketsMotley Fool

What happened

Dine Brands Global (NYSE: DIN) stock climbed 37.2% in February, according to data provided by S&P Global Market Intelligence. Shares made big gains on strong earnings results and the release of a five-year plan that suggested promising momentum for the company.

Continue Reading Below

So what

DineEquity announced it would be changing its name to Dine Brands Global prior to its earnings call on Feb. 20 -- a move meant to reflect that the company was in transition and one that was followed by more material reasons for shareholders to be excited. Heading into the earnings release, the average analyst estimate projected earnings per share of $0.64, but actual results for the December-ended quarter came in at $0.74 on sales that narrowly beat expectations.

Shares managed to post big gains on the month despite the earnings report being paired with the news that the company was lowering its quarterly dividend from $0.97 to $0.63. While Dine Brand's payout took a sizable hit, management delivered the news with a spoonful of sugar -- a new five-year plan targeting hearty growth.

Now what

The company outlined plans to strengthen its existing Applebee's and IHOP stores, pursue new acquisitions and partnerships, and use technology to improve operational efficiency and the customer experience. Management is guiding for same-store sales growth between 0% and 3% for both chains in the current fiscal year, and its more long-term targets suggest the restaurants could be poised for a sustained rebound.

The company sees overall sales climbing at a low single-digit rate over the next five years and margins improving 10% over the stretch. These catalysts have management guiding for earnings-per-share growth in the high teens. If the company can make good on those projections, Dine Brands looks like an attractive buy at current prices. Shares trade at roughly 15 times forward earnings estimates and pack a 3.4% yield even after the big dividend cut.

10 stocks we like better than Dine Brands GlobalWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Dine Brands Global wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of March 5, 2018

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.