What Happened?
Shares of restaurant company Bloomin’ Brands (NASDAQ:BLMN) fell 7.4% in the morning session after the company reported mixed third-quarter results that showed a significant decline in profitability, outweighing beats on headline revenue and earnings.
The restaurant operator surpassed Wall Street's expectations for revenue and adjusted earnings per share (EPS) and also raised its full-year profit guidance. However, investors looked past the headline figures to focus on deteriorating underlying fundamentals. Revenue fell 10.6% year over year, and profitability metrics showed severe weakness. Adjusted EBITDA, a key measure of operational profit, missed analyst estimates by a staggering 82%. Furthermore, the company's operating margin swung to a loss, falling to negative 3.9% from a positive 1.7% in the prior year, signaling that rising costs were eroding profits. This sharp drop in profitability appeared to spark concerns about the company's financial health, leading to a significant sell-off.
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What Is The Market Telling Us
Bloomin' Brands’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago when the stock gained 6.9% on the news that a key inflation report came in cooler than anticipated, fueling optimism for potential interest rate cuts. The September Consumer Price Index (CPI) indicated a 3.0% year-over-year increase, just below the 3.1% forecast, with a monthly rise of 0.3% also below estimates. Investors viewed this data as a strong signal that inflationary pressures are subsiding. This development has increased speculation that the Federal Reserve may have more room to implement interest rate cuts in the near future. Easing monetary policy typically lowers borrowing costs for companies and can make stocks more attractive, which explains the broad-based rally across Wall Street.
Bloomin' Brands is down 43.9% since the beginning of the year, and at $6.71 per share, it is trading 60.5% below its 52-week high of $16.99 from November 2024. Investors who bought $1,000 worth of Bloomin' Brands’s shares 5 years ago would now be looking at an investment worth $463.69.
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