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The Bob Evans Sale-Leaseback Means Good Things For Bloomin' Brands

The Bob Evans Farms Inc BOBE 0.47% sale-leaseback terms could provide some insight into a similar deal by Bloomin’ Brands Inc BLMN 0.73%. According to Credit Suisse analyst Jason West, the terms of the Bob Evans deal are not surprising.

“We had estimated that BLMN’s sale-leaseback could be ~20c accretive by 2017, based on: (1) $350 value per sqft (pre-tax), (2) 6.25% cap rate and (3) 45% of proceeds allocated to share buybacks,” West explains.

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Now that Credit Suisse has the Bob Evans deal to use as a guide, the firm feels even more confident that they were on target with their Bloomin’ Brands estimates.

The Bob Evans’ sales price of about $276/sqft is well short of Credit Suisse’s projections for Bloomin’ Brands, but West believes that the premium is justified. Outback generates about $553 of sales per sqft of restaurant space versus only about $344 for Bob Evans.

West also takes comfort in the fact that Bob Evans’ sales price was in-line with expectations established back in December.

“This tells us that, despite slowing SSS in the casual dining segment, the market for restaurants with an established brand name remains intact,” he notes.

Credit Suisse maintains an Outperform rating and $21 price target for Bloomin’ Brands.

Disclosure: the author holds no position in the stocks mentioned.

DateFirmActionFromTo
Dec 2015Stephens & Co.UpgradesUnderweightEqual-weight
Dec 2015OppenheimerMaintainsOutperform
Jun 2015Miller TabakUpgradesHoldBuy

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