Key insights
- Driven Brands disclosed accounting errors, leading to a restatement of financials and impacting EBITDA. While Benchmark reaffirmed its Buy rating, other analysts have revised earnings downwards. The company's rapid M&A activity and integration challenges contributed to the errors. Despite upgraded finance leadership and remediation efforts, material weaknesses in internal controls persist, creating uncertainty and a slightly negative signal for US equities.
Investing.com - Benchmark maintained its Buy rating and $22.00 price target on Driven Brands (NASDAQ:DRVN) shares following the company’s disclosure of accounting errors. The stock currently trades at $13.75, well below InvestingPro’s Fair Value of $20.23, suggesting the shares may be undervalued despite the accounting issues.
The errors affected cash reporting, which was overstated since 2022, and lease accounting, which was understated since 2023. The mistakes also involved working capital and expense classification related to Driven Advantage and the Oracle transition.
The accounting impacts were concentrated in prior periods, with adjusted EBITDA affected by $57 million in fiscal 2023, $12 million in fiscal 2024, and $8 million in fiscal 2025. The company recorded a $32 million hit to retained earnings. Despite these challenges, Driven Brands maintains a market cap of $2.27 billion and reported EBITDA of $341 million over the last twelve months, though InvestingPro Tips note that five analysts have revised earnings downwards for the upcoming period.
The errors were driven by rapid mergers and acquisitions activity and integration challenges at the company. Material weaknesses in internal controls remain as the company continues its remediation efforts.
Driven Brands has upgraded its finance leadership, systems, and controls. The company is working toward its first quarter 2026 filing.
In other recent news, Driven Brands released its fourth-quarter and full-year fiscal 2025 results, following the restatement of its fiscal 2023-2025 financials. The company provided fiscal 2026 guidance with projected revenue between $1.95 billion and $2.05 billion and adjusted EBITDA ranging from $430 million to $460 million, excluding restatement-related costs. Analysts have responded with various updates to their price targets and ratings. BMO Capital lowered its price target to $14 but maintained a Market Perform rating, noting that fourth-quarter results slightly exceeded preliminary figures. Piper Sandler raised its price target to $13, maintaining a Neutral rating due to increased confidence in the financials. RBC Capital reduced its price target to $18, keeping an Outperform rating, and highlighted that the adjusted EBITDA guidance was about 4% below consensus expectations. BTIG also lowered its price target to $17, maintaining a Buy rating and citing concerns about the Take 5 unit’s performance. Additionally, Baird reinstated coverage with an Outperform rating and a price target of $18, emphasizing the growth potential of the Take 5 oil change business.
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