It seems as though the wait may finally be over for investors of DineEquity Inc. The Glendale parent company of Applebee’s Neighborhood Grill & Bar and IHOP Restaurants reported earnings for one of the strongest quarters it’s had in several years last week, prompting a skyrocketing share price. Within a few hours of the release, the price jumped more than 10 percent. Tom Emrey, chief financial officer at DineEquity, said the company was pleased with the results from the quarter but more work needs to be done. “There are some things to be optimistic about,” he said. “While one quarter is not a trend maker, we’re excited at the results.” In its second quarter earnings, the company beat analysts’ expectations on profit and revenue, despite overall struggles in the industry. Net income was $19.7 million ($1.02 a share), 10 cents above analyst expectations. What’s more, the company announced a 75 cent dividend for the third straight quarter. Prior to this year, the last time DineEquity handed out a dividend was October 2008. “They’re definitely heading in the right direction,” said Will Slabaugh, an analyst that covers the company for Stephens Inc., an investment bank in Little Rock, Ark. “The industry was actually fairly weak in the back half of the quarter. That makes what DineEquity did even more impressive.” While its Applebee’s brand posted positive sales, the real movement for the company came from its IHOP restaurants. In its announcement, the company said sales at IHOP rose almost 2 percent in the second quarter due to an increase in guest traffic. It was the first time since 2010 that IHOP posted gains in same-restaurant sales and guest traffic in the same quarter. The turnaround has been a long time coming. After its 2007 purchase of the Applebee’s brand, which cost DineEquity more than $2 billion, it has been weighed down with debt. It has spent the last five years franchising the outlets of the bar and grill and cleaning up the balance sheet. Today, 99 percent of Applebee’s and IHOP outlets are franchised. And since 2007, when the company had more than $2.2 billion in debt, it’s reduced that number by almost 47 percent. More than half of the company’s remaining debt, $761 million of it, is in high-interest bonds. Emrey said the company is comfortable with its balance sheet as it stands, but acknowledged that the 9.5 percent bonds are a priority. “We’re happy with our capital structure now,” he said. “But we’re on a continuous basis analyzing the opportunity to refinance the debt, especially that debt.” Still, Slabaugh said the company has more to prove before investors should buy. “We’re still sticking on the sidelines until we see a few more successful quarters,” he said. “But the company significantly outperformed where we thought they would be.”
Investors Load Plates With Eatery Operator’s Stock
