Analyst: Dump This Stock Before Earnings

The company is slated to report earnings on Valentine's Day

The shares of Outback parent Bloomin' Brands Inc (NASDAQ:BLMN) are lower this morning, after BofA-Merrill Lynch downgraded the stock to "underperform" from "neutral." The brokerage firm also cut its price target to $17 from $23, representing a discount to BLMN's close of $19.17 on Thursday. BofA-Merrill Lynch said the restaurant company will likely issue a disappointing forecast when it reports earnings next Thursday, Feb. 14.

BLMN stock was last seen 3.8% lower at $18.43. The security had a strong start to 2019, rallying more than 7% in the first week of the year -- its best week since early November. However, the shares have since backpedaled from the round-number $20 region -- home to a 61.8% Fibonacci retracement of BLMN's decline from its November peaks to its Dec. 24 low -- and have spent the past month in a channel of lower highs and lows.

Most analysts are already wary of Bloomin' Brands. Prior to today's downgrade, the equity boasted just three "buy" or better ratings, compared to six "holds." Meanwhile, the consensus 12-month price target of $21.90 represents a premium of just 18% to BLMN's current price.

Looking at the company's earnings history, BLMN stock has been flat or moved higher the day after six of the last eight quarterly releases. In October, the equity edged 1.8% higher the day after Bloomin' reported. On average, the shares have moved 4.2% the day after the last eight earnings, regardless of direction. This time around, the options market is pricing in more than double that move for BLMN, with implied volatility data indicating a 9.6% swing.