A Bloomin' Buy

12/12/2014 12:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

This featured recommendation operates the popular Outback Steakhouse chain of restaurants, notes growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.

Bloomin’ Brands (BLMN) derives its name from the onion dish popular at Outback locations; the company also operates Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s Steakhouse.

Until recently, Bloomin’ also operated the Roy’s Restaurant chain, which it just sold to United Ohana, LLC.

The casual dining market has been strong for Bloomin’, with all the company’s brands outperforming the casual-dining sector during the third-quarter.

Overall, Outback and Fleming’s same-store sales rose 4.8%, with Bonefish sales up 2.6%. Strong international sales helped to drive third-quarter revenue 10.1% higher, bolstering management confidence heading into the end of the year.

The company has also made moves to exit underperforming locations, with Bloomin’ closing all but two of its 36 restaurants in South Korea due to underperformance.

While the closures cost Bloomin’ $5.4 million in severance and charges, the company believes the reorganization should allow it to focus on improving sales and marketing in other areas.

While there is little sex appeal with Bloomin’, the company’s solid performance and reorganization has the makings of a winning conservative growth stock.

While BLMN showed solid growth in 2013, shares have had a rough go so far this year. Shares came into 2014 struggling with overhead resistance near $25.

Stagnant growth wasn’t enough to send investors scurrying, but BLMN languished between support at $20 and resistance at $25. Weak Q2 sales unraveled support in early August, and BLMN hit a 52-week low near $15 as a result.

But the stock recovered quickly and BLMN appears to have shaken out all the weak hands. With strong Q3 earnings, BLMN has once again reclaimed support at $20 and should be headed higher once the details of the Roy’s sale are digested.

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