Brinker International (EAT – Free report) Shares fell over -14% this morning after the company reported mixed results for its fiscal fourth quarter. Still, Brinker’s, the operator of Chili’s Bar & Grill and Maggiano’s Little Italy, is up +60% this year.
Given the outstanding performance year-to-date, investors may be wondering if the post-earnings pullback represents a buying opportunity. So far, Brinker has comfortably outperformed the broader indexes and the Zacks Retail-Restaurants Market, including two of its industry leaders El Pollo Loco (,).LOCAL – Free report) and Texas Roadhouse (TXRH – Free report) .
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Brinker’s fourth quarter results
Brinker’s fourth-quarter revenue was $1.2 billion, up 12% year over year and beating estimates of $1.15 billion by 4%. However, fourth-quarter earnings per share of $1.61 missed expectations of $1.65 per share by -2%, despite increasing 15% from the year-ago quarter. Brinker had previously beaten earnings expectations for seven consecutive quarters and posted an astonishing average earnings surprise of 211.01% in its last four quarterly reports.
Increased menu prices at Chili’s were a key driver of Brinkers’ performance. The company said it continued to outperform the industry in both sales and traffic. Overall, Brinkers’ total revenue increased 7% to $4.41 billion in fiscal 2024, with earnings per share increasing 45% to $4.10, compared to $2.83 per share in fiscal 2023.
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Favorable orientation
For fiscal 2025, Brinker expects total revenue in the range of $4.55 billion to $4.62 billion, above the current Zacks Consensus of $4.51 billion, or 3% growth. Brinker projects earnings per share in the range of $4.35 to $4.75, with the high end of the target in line with estimates of $4.73 per share, or 13% growth.
Attractive rating from Brinker
Brinker’s stock trades around $60 and has an earnings multiple of 14.8, which represents an attractive discount to the S&P 500’s 22.9 times. In addition, EAT trades well below its Zacks Retail Restaurants industry average of 25. Texas Roadhouse is at 26.9 and El Pollo Loco is at 15.7.
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Take away
Currently, Brinker stock carries a Zacks Rank #1 (Strong Buy). The pullback following the earnings release could well be a buying opportunity given Brinker’s attractive valuation and compelling growth. However, the retention of this Strong Buy rating will likely depend on the evolution of earnings estimate revisions in the coming weeks following the fourth-quarter report.
