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by Zacks Equity ResearchSeptember 13, 2012 | Comments : 0 Recommended this article: (0)
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A Robust End to Fiscal 2012
On August 9, Brinker reported solid fourth quarter fiscal 2012 results with adjusted earnings of 61 cents per share, surpassing the Zacks Consensus Estimate of 58 cents by 5.2% and last years earnings of 48 cents by 27.1%. The better-than-expected results were driven chiefly by a strong top-line as well as unit growth.
Total revenue crept higher 1.5% year over year to $728.4 million, due to a rise (+2.2%) in comparable restaurant sales at Chili's Grill & Bar restaurant for the fifth consecutive quarter and an upside (+1.9%) at Maggiano's for the 10th time in a row. Moreover, comparable restaurant sales at franchised restaurants advanced 2.1%, aided by growth of 2.4% and 1.3% in franchised domestic and international, respectively.
For fiscal 2012, the company reported adjusted earnings of $158.0 million or $1.96 per share, versus $140.1 million or $1.52 in the prior year. Total revenue grew 28% to $784.5 million.
Impressive Outlook for 2013
For 2013, Brinker expects adjusted earnings of $2.30 to $2.45, up 17% to 25%. The company anticipates comparable restaurant sales for the full year to increase 2% 3% year over year and operating margin to expand by 100 bps.
Strong Earnings Momentum
This Zacks #2 Rank (Buy) stock has experienced significant upward estimate revisions over the past 60 days. The Zacks Consensus Estimate for fiscal 2013 is up 3.1% to $2.35, while the Zacks Consensus Estimate for 2014 increased 3.5% to $2.67. The outlooks for 2013 and 2014 represent year-over-year advances of 19.9% and 13.7%, respectively.
Dividend Portraying Strength
Brinker is one of the few casual dining chains to pay a regular dividend, even amidst the latest recession. The latest hike of 25% was announced in August 2012. Currently, the company pays a quarterly dividend of 20 cents per share, affirming a dividend yield of 2.2%. Since 2006, the company has raised its dividend 5 times from a meager 6.7 cents.
Moreover, the company continues to repurchase shares from time to time. On the same day of the latest dividend hike, Brinker extended its share buyback program by an additional $500 million. Brinkers commitment toward enhancing shareholders returns reflects its sound liquidity position and well defined future prospects.
Valuation Looks Reasonable
The stock is going for about 15.14x the forward estimate for fiscal 2013, a 27.9% discount to the peer group average of 20.99x. Its price to sales ratio of 0.93 is almost in-line with what similar firms offer.
Moreover, the stock also looks attractive given a trailing 12-month ROE of 45.6%, which is higher than the peer group average of 26.5%. Its PEG ratio is 1.11 based on a 5-year EPS growth rate of 13.6%.
Since November 28, 2011, Brinker shares have fared relatively better than the simple moving average for 50 days or SMA (50). Moreover, since November 30, 2011, Brinker shares have consistently fared better than the simple moving average for 200 days or SMA (200). The year-to-date return for the stock is noteworthy at 33.0% compared to an S&P 500 tally of 14.0%.
With a positive sales momentum, rising earnings estimates, strong growth projections, stable liquidity position and a healthy dividend yield, Brinker offers an enticing upside potential going forward. Moreover, a continued focus on international expansion and prudent cost-control measures bode well for its long-term growth.
Based in Dallas, Texas, and founded in 1977, Brinker remains one of the strongest long-term players in the casual dining segment. As of June 27, 2012, the company owns, operates or franchises around 1,536 Chili's Grill & Bar restaurants and around 45 Maggiano's Little Italy restaurants. With a market capitalization of $2.63 billion, Brinker primarily competes with Darden Restaurants, Inc. (DRI) and DineEquity, Inc. (DIN).
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