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Brinker (EAT) Down 3.8% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Brinker International, Inc. (EAT - Free Report) . Shares have lost about 3.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Brinker Misses Q2 Earnings & Revenues; Outlook Cut
Brinker posted lower-than-expected second-quarter fiscal 2017 results with both earnings and revenues missing the Zacks Consensus Estimate.
Earnings and Revenue Discussion
Adjusted earnings of $0.71 per share lagged the Zacks Consensus Estimate of $0.75 by 5.3%. Further, earnings decreased nearly 9% year over year due to lower revenues and margins.
Quarterly revenues declined 2.2% year over year to $771 million due to lower comps, somewhat offset by increased restaurant capacity. Company sales also decreased 2.2%, while franchise and other revenues declined 2.6%. Moreover, revenues missed the Zacks Consensus Estimate of $795 million by nearly 3%.
Comps declined 2.9% in the quarter compared with a comps decline of 1.3% in the previous quarter.
Behind the Headline Numbers
Brinker International primarily engages in the ownership, operation, development and franchising of various restaurant brands under the names Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s).
Chili's
Chili's reported revenues of $632.1 million, down 2.9% year over year.
Chili's company-owned comps fell 3.3%, due to a 6.5% decline in traffic partially offset by a 1.8% and 1.4% improvement in pricing and mix, respectively. Comps compared unfavorably with the prior-quarter decline of 1.4% and 2.8% in the year-ago quarter.
Comps at its franchised restaurants went down 3.5% as against 0.9% growth in the year-ago quarter and 0.6% decline in the last quarter.
Comps declined 4.2% in international franchised Chilli’s restaurants, as against the year-ago quarter growth of 2.6% and prior-quarter’s rise of 0.9%. Comps in the domestic franchised units fell 3% as against decline of 0.1% in the year-ago quarter and fall of 1.6% in the prior quarter.
Domestic comps (including company-owned and franchised) at Chili's declined 3.2%, comparing unfavorably with the prior quarter decline of 1.3%. Comps were down 2.1% in the prior-year quarter.
Maggiano's
Maggiano's sales increased 1.7% year over year to $116.6 million.
Maggiano's comps fell 0.8% in the quarter due to a 2.5% and 0.9% decline in traffic and mix, respectively, partially offset by a 2.6% improvement in pricing. Comps compared unfavorably with the prior-quarter decline of 0.6%, but favorably with the year-ago comparable period decrease of 1.8%.
Expenses and Margins
Total costs and expenses decreased 0.5% to $709.5 million.
Cost of sales margin improved 80 basis points, primarily reflecting favorable commodity pricing for chicken and ground beef, partially offset by higher avocado cost.
Restaurant labor margin was unfavorable 90 bps in the quarter, primarily due to wage rate increase and higher employee health insurance cost.
Restaurant operating margin, as a percent of company sales contracted by 100 bps.
Fiscal 2017 Guidance
The company slashed its fiscal-2017 adjusted earnings per share projection to reflect the impact of lower category sales than originally planned. It now expects earnings in the range of $3.05 to $3.15 compared with $3.40–$3.50 guided previously. Notably, the Zacks Consensus Estimate for fiscal-2017 earnings stands at $3.33.
Moreover, the company expects comps growth to be down in the range of 1.5–2% for the full year. Restaurant operating margin is now estimated to be down roughly 90 bps year over year on a 52-week basis.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
At this time, Brinker's stock has a nice score of 'B' on both growth and momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 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.
Based on our scores, the stock is primarily suitable for value investors while also being suitable to a lesser degree for those looking for growth and momentum.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Brinker (EAT) Down 3.8% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Brinker International, Inc. (EAT - Free Report) . Shares have lost about 3.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Brinker Misses Q2 Earnings & Revenues; Outlook Cut
Brinker posted lower-than-expected second-quarter fiscal 2017 results with both earnings and revenues missing the Zacks Consensus Estimate.
Earnings and Revenue Discussion
Adjusted earnings of $0.71 per share lagged the Zacks Consensus Estimate of $0.75 by 5.3%. Further, earnings decreased nearly 9% year over year due to lower revenues and margins.
Quarterly revenues declined 2.2% year over year to $771 million due to lower comps, somewhat offset by increased restaurant capacity. Company sales also decreased 2.2%, while franchise and other revenues declined 2.6%. Moreover, revenues missed the Zacks Consensus Estimate of $795 million by nearly 3%.
Comps declined 2.9% in the quarter compared with a comps decline of 1.3% in the previous quarter.
Behind the Headline Numbers
Brinker International primarily engages in the ownership, operation, development and franchising of various restaurant brands under the names Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s).
Chili's
Chili's reported revenues of $632.1 million, down 2.9% year over year.
Chili's company-owned comps fell 3.3%, due to a 6.5% decline in traffic partially offset by a 1.8% and 1.4% improvement in pricing and mix, respectively. Comps compared unfavorably with the prior-quarter decline of 1.4% and 2.8% in the year-ago quarter.
Comps at its franchised restaurants went down 3.5% as against 0.9% growth in the year-ago quarter and 0.6% decline in the last quarter.
Comps declined 4.2% in international franchised Chilli’s restaurants, as against the year-ago quarter growth of 2.6% and prior-quarter’s rise of 0.9%. Comps in the domestic franchised units fell 3% as against decline of 0.1% in the year-ago quarter and fall of 1.6% in the prior quarter.
Domestic comps (including company-owned and franchised) at Chili's declined 3.2%, comparing unfavorably with the prior quarter decline of 1.3%. Comps were down 2.1% in the prior-year quarter.
Maggiano's
Maggiano's sales increased 1.7% year over year to $116.6 million.
Maggiano's comps fell 0.8% in the quarter due to a 2.5% and 0.9% decline in traffic and mix, respectively, partially offset by a 2.6% improvement in pricing. Comps compared unfavorably with the prior-quarter decline of 0.6%, but favorably with the year-ago comparable period decrease of 1.8%.
Expenses and Margins
Total costs and expenses decreased 0.5% to $709.5 million.
Cost of sales margin improved 80 basis points, primarily reflecting favorable commodity pricing for chicken and ground beef, partially offset by higher avocado cost.
Restaurant labor margin was unfavorable 90 bps in the quarter, primarily due to wage rate increase and higher employee health insurance cost.
Restaurant operating margin, as a percent of company sales contracted by 100 bps.
Fiscal 2017 Guidance
The company slashed its fiscal-2017 adjusted earnings per share projection to reflect the impact of lower category sales than originally planned. It now expects earnings in the range of $3.05 to $3.15 compared with $3.40–$3.50 guided previously. Notably, the Zacks Consensus Estimate for fiscal-2017 earnings stands at $3.33.
Moreover, the company expects comps growth to be down in the range of 1.5–2% for the full year. Restaurant operating margin is now estimated to be down roughly 90 bps year over year on a 52-week basis.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Brinker International, Inc. Price and Consensus
Brinker International, Inc. Price and Consensus | Brinker International, Inc. Quote
VGM Scores
At this time, Brinker's stock has a nice score of 'B' on both growth and momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 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.
Based on our scores, the stock is primarily suitable for value investors while also being suitable to a lesser degree for those looking for growth and momentum.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.