Denny's Q1 Earnings: Can the Breakfast Giant Turn the Tide?

Denny’s (DENN) is set to deliver its Q1 2025 earnings report on May 5, 2025, marking a critical moment for the struggling diner chain. With its stock price hovering near $3.71—far below analyst targets—the company faces pressure to demonstrate stabilization after a disappointing Q4 and a broader industry backdrop of uneven recovery. Here’s what investors need to know.

Key Earnings Expectations

Analysts project Q1 revenue of $109.85 million, a slight dip from earlier estimates, with adjusted EPS expected to hit $0.09. For the full year, forecasts have been trimmed: revenue is now seen at $468.83 million (down from $470.67 million) and EPS at $0.48 (down from $0.54). These revisions reflect lingering challenges, including inflation, labor costs, and shifting consumer preferences.

Yet the disconnect between these lowered estimates and bullish analyst sentiment is stark. The average 12-month price target stands at $7.21, with some analysts like GuruFocus predicting a $11.83 valuation, implying over 200% upside from current levels. This optimism hinges on whether Denny’s can execute its turnaround strategy, which includes menu innovation, digital ordering enhancements, and cost management.

The Q4 Miss and Its Aftermath

Denny’s last report, for Q4 2024, was underwhelming. Revenue of $114.67 million missed estimates by $900,000, while EPS of $0.13 fell short of $0.14. The stock plummeted 23.8% post-earnings, though it has since rebounded 15.7% over the past month. This volatility underscores the high stakes for Q1: another miss could reignite selling, while a beat might validate the analyst optimism.

Peer Performance Offers Context

The restaurant sector is mixed. Brinker International (EAT), which owns Chili’s, reported 27.2% revenue growth in Q1 but saw shares drop 16.4% due to margin pressures. Meanwhile, BJ’s Restaurants (BJRI) matched expectations with 3.2% revenue growth and gained 13.4% post-earnings. Denny’s must prove it can avoid Brinker’s margin struggles while capturing BJ’s operational resilience.

The Bottom Line: Risks and Rewards

Denny’s faces significant hurdles. Its Q1 results will be scrutinized for signs of stabilization: same-store sales trends, labor cost containment, and progress on its digital initiatives. The stock’s current valuation leaves little room for error—analysts are pricing in a rebound.

If Denny’s can deliver on EPS and show sequential improvement in sales trends, the $7.21 average price target becomes achievable, with upside to $11.83 if execution exceeds expectations. However, another miss or weak guidance could push the stock back toward recent lows.

Investors should also monitor broader trends. The sit-down dining segment, where Denny’s competes, saw average gains of 9.2% over the past month—Denny’s outperformed that, but it’s still trading at a deep discount to its peers. The path to $7.21 hinges on proving it’s not just surviving but gaining traction in a competitive market.

In short: Denny’s Q1 report is a make-or-break moment. The data will decide whether this breakfast icon can finally turn its narrative from caution to confidence.