Denny’s Corporation (DENN) is rebounding from several quarters of declining earnings, and is seeing gradual improvement as new management implements a turnaround strategy, says James H. England Jr., Lead Manager at Aster Investment Management, Inc.
“The company had experienced several quarters of declining earnings per share due to rising food costs and lower sales. Sales were hurt by declining traffic,” England said. “Despite these problems, the company did have some things going for it, such as scale advantages and high brand awareness.”
Positive changes in the company started occurring when a new management team was put into place, says England. DENN‘s new management is now focused on refranchising company stores and rebuilding the brand. This strategy and DENN‘s attractive cash flow yield are promoting earnings growth for the company.
“We see them continuing to grind out gradual improvement and believe the company could eventually earn over $0.50 a share in normalized earnings from less than $0.30 in 2012,” England said. “We believe that Denny’s can continue rebuild the brand and drive years of earnings growth.”
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