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I have always been a fan of Chili’s, a restaurant subsidiary of Brinker International (EAT - Free Report) . I have viewed it as the best of that category of restaurants, thanks in large part to those great bottomless chips and Presidente margaritas.
But many times, even if you think a company’s product is solid, it doesn’t make for a great investment. That is arguably the case for Brinker, as it appears as though few people agree with me about Chili’s, at least if we look to the company’s most recent earnings report.
EAT in Focus
In Brinker’s most recent earnings release, the company posted earnings of 71 cents per share which missed estimates, as analysts were expecting 75 cents per share in profits from the company instead. Quarterly revenues were also lower, while comps and margins were also unfavorable.
While this wasn’t a great report, the especially concerning part was the guidance from the company. EAT is now looking for earnings of between $3.05 and $3.15 which is a sharp cut from previous guidance, and below the estimate at the time which was $3.33/share.
So, thanks to this weak report—which now makes two straight misses for EAT—analysts have been slashing estimates for the company. Six estimates have gone lower in the past week for the current quarter compared to zero higher, while we have seen eight estimates go lower in the past week for the current year compared to zero higher.
Brinker International, Inc. Price, Consensus and EPS Surprise
These kinds of cuts are bringing the expected full year earnings trend for EAT down to a nearly 13 percent earnings decline year-over-year, while a poor industry rank isn’t helping matters either. With figures like these and the overall trend in the company, we can’t be surprised that EAT now has a Zacks Rank #5 (Strong Sell) which is why we are looking for more sluggish trading from Brinker in the near term.
Other Choices
Though the restaurant segment has a pretty weak rank overall, but there are still some solid choices in the group. One that stands out is definitely Dave & Buster’s (PLAY - Free Report) . This company currently has a Zacks Rank #1 (Strong Buy), while it has a solid fundamental score as well.
Best of all though, the company has a nice track record in terms of earnings estimate revisions to the upside, while Dave & Buster’s has seen an impressive history of beating earnings estimates as well. So, if you are looking for a restaurant stock to kick-off February, give PLAY a closer look and consider avoiding EAT, at least until Brinker can turn things around and get back to a growth stage.
More Stocks to Sell. Now.
Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, you should consider removing them immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.
Image: Bigstock
Bear of the Day: Brinker International (EAT)
I have always been a fan of Chili’s, a restaurant subsidiary of Brinker International (EAT - Free Report) . I have viewed it as the best of that category of restaurants, thanks in large part to those great bottomless chips and Presidente margaritas.
But many times, even if you think a company’s product is solid, it doesn’t make for a great investment. That is arguably the case for Brinker, as it appears as though few people agree with me about Chili’s, at least if we look to the company’s most recent earnings report.
EAT in Focus
In Brinker’s most recent earnings release, the company posted earnings of 71 cents per share which missed estimates, as analysts were expecting 75 cents per share in profits from the company instead. Quarterly revenues were also lower, while comps and margins were also unfavorable.
While this wasn’t a great report, the especially concerning part was the guidance from the company. EAT is now looking for earnings of between $3.05 and $3.15 which is a sharp cut from previous guidance, and below the estimate at the time which was $3.33/share.
So, thanks to this weak report—which now makes two straight misses for EAT—analysts have been slashing estimates for the company. Six estimates have gone lower in the past week for the current quarter compared to zero higher, while we have seen eight estimates go lower in the past week for the current year compared to zero higher.
Brinker International, Inc. Price, Consensus and EPS Surprise
Brinker International, Inc. Price, Consensus and EPS Surprise | Brinker International, Inc. Quote
These kinds of cuts are bringing the expected full year earnings trend for EAT down to a nearly 13 percent earnings decline year-over-year, while a poor industry rank isn’t helping matters either. With figures like these and the overall trend in the company, we can’t be surprised that EAT now has a Zacks Rank #5 (Strong Sell) which is why we are looking for more sluggish trading from Brinker in the near term.
Other Choices
Though the restaurant segment has a pretty weak rank overall, but there are still some solid choices in the group. One that stands out is definitely Dave & Buster’s (PLAY - Free Report) . This company currently has a Zacks Rank #1 (Strong Buy), while it has a solid fundamental score as well.
Best of all though, the company has a nice track record in terms of earnings estimate revisions to the upside, while Dave & Buster’s has seen an impressive history of beating earnings estimates as well. So, if you are looking for a restaurant stock to kick-off February, give PLAY a closer look and consider avoiding EAT, at least until Brinker can turn things around and get back to a growth stage.
More Stocks to Sell. Now.
Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, you should consider removing them immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.
See today's Zacks "Strong Sells" absolutely free >>.