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The shares of the owner of a restaurant chain Brinker (NYSE:EAT) are down 12% in early trading. EAT stock is plunging after the company’s earnings for the fiscal fourth quarter ended June 26 fell short of analysts’ average estimates. The company’s full-year earnings forecast also missed analysts’ average forecast. On a positive note, the company’s revenue rose 11% last quarter compared to the same period last year as some of its initiatives bore fruit.
Brinker’s restaurant chains include Chili’s and Maggiano’s.
Brinker’s findings and guidelines
Brinker’s revenue rose 11% year over year to $1.2 billion in the fourth quarter, roughly in line with analysts’ average estimate. However, earnings per share excluding certain items were $1.61, well below the average forecast of $1.72. The company’s earnings per share rose 30 cents year over year.
The company provided adjusted earnings guidance of $4.35 to $4.75 for the current fiscal year, below analysts’ average estimate of $4.78. However, the company is expected to generate revenue of $4.45 billion to $4.62 billion this year, above the average estimate of $4.52 billion.
In addition, the restaurant owner’s comparable restaurant sales increased 13.5% year over year last quarter, led by a 14.8% increase in Chili’s comparable sales. According to Brinker, Chili’s growth was partly due to the launch of the new Big Smasher Burger. The dish consists of Thousand Island dressing, American cheese, red onions, pickles and lettuce. Advertising and price increases also contributed to Chili’s strong growth. In addition, customer traffic at Chili’s increased an impressive 5.9% year over year.
Analysis of the EAT share
The company appears to be growing very healthily, although its earnings were probably below the average analyst estimates, mainly due to investments in advertising, which seem to have proven successful. In addition, the price-to-earnings ratio is a reasonable 14.7.
On the other hand, in the long run, the company could suffer from a trend of lower consumer spending and more difficult comparisons following the launch of the Smasher Burger.
At the time of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.
At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.
