It has been about a month since the last earnings report for Brinker International (EAT). Shares have lost about 14.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Brinker International due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Brinker reported second-quarter fiscal 2025 results, with earnings and revenues beating the Zacks Consensus Estimate. Both top and bottom lines increased from the prior-year reported figures.
The company's quarterly performance benefited from strong fundamentals, leading to better guest experience and steady business growth. Higher comparable restaurant sales at Chili’s drove the top line as both new and returning guests visited more frequently despite a competitive market. The company also raised its guidance for fiscal 2025.
In the quarter under review, Brinker reported adjusted earnings per share (EPS) of $2.80, which beat the Zacks Consensus Estimate of $1.80. The company reported an EPS of 99 cents in the prior-year quarter.
In the fiscal second quarter, total revenues of $1.36 billion outpaced the consensus mark of $1.24 billion. The top line increased 26.5% on a year-over-year basis. Brinker gained from the solid performance of Chili's.
In the fiscal second quarter, revenues in the Chili’s segment rose 30.4% year over year to $1.21 billion. This upside was backed by favorable comparable restaurant sales, driven by menu pricing, higher traffic and a favorable menu item mix.
Chili's restaurant expenses (as a percentage of company sales) in the fiscal second quarter were 81.3%, down from 88.4% in the prior-year quarter. This downside was caused by sales leverage, partially overshadowed by an increase in hourly labor, repairs and maintenance expenses, higher manager salaries and bonus, and unfavorable commodity costs.
Chili's company-owned traffic rose 19.9% year over year in the quarter under discussion. The metric fell 0.6% in the prior-year quarter.
The segment’s company-owned comps rose 31.4% in the fiscal second quarter from the year-ago quarter’s levels.
At Chili’s, domestic comps (including company-owned and franchised) gained 30.8% compared with a 5.1% rise reported in the prior-year period.
Maggiano’s sales in the fiscal second quarter increased 1.7% year over year to $149.4 million. Our model predicted segmental revenues at $151.2 million. Favorable comparable restaurant sales, courtesy of increased menu pricing, drove this upside. However, this was partially offset by lower traffic. Comps in the segment rose 1.8% year over year.
Traffic in the quarter under discussion fell 4.9% year over year. The metric was down 4.2% in the prior-year quarter.
Maggiano's company restaurant expenses (as a percentage of company sales) in the fiscal second quarter were 77.3%, marginally up from 77.1% a year ago. This upside was caused by increased advertising expense, management salary, repairs and maintenance, and unfavorable commodity costs. However, this was partially offset by sales leverage and lower hourly labor.
In the quarter under review, total operating costs and expenses were $1.20 billion, up from $1.01 billion reported in the year-ago quarter. Adjusted restaurant operating margin, as a percentage of company sales, was 19.1%, up from 13.1% reported in the prior-year quarter.
Adjusted EBITDA in the fiscal second quarter was $215.8 million. The figure was up from $107 million reported in the prior-year quarter.
As of Dec. 25, 2024, cash and cash equivalents amounted to $14.8 million compared with $22.7 million as of Dec. 25, 2023. As of Dec. 25, long-term debt (less current installments) was $625 million compared with $786.3 million as of June 26, 2024.
In fiscal 2025, management anticipates total revenues to be in the range of $5.15-$5.25 billion compared with the previous expectation of $4.70-$4.75 billion. Capital expenditures are expected in the $240-$260 million band, up from the prior expectation of $195-$215 million. Brinker anticipates fiscal 2025 EPS in the range of $7.5-$8, up from the prior estimate of $5.2-$5.5.
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 38.59% due to these changes.
Currently, Brinker International has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Brinker International has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Brinker International belongs to the Zacks Retail - Restaurants industry. Another stock from the same industry, Starbucks (SBUX), has gained 5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2024.
Starbucks reported revenues of $9.4 billion in the last reported quarter, representing a year-over-year change of -0.3%. EPS of $0.69 for the same period compares with $0.90 a year ago.
Starbucks is expected to post earnings of $0.52 per share for the current quarter, representing a year-over-year change of -23.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -7.4%.
Starbucks has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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This article originally published on Zacks Investment Research (zacks.com).
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