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Brinker (EAT) Beats on Q3 Earnings, Lags Sales, Stock Down
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Brinker International, Inc. (EAT - Free Report) posted mixed third-quarter fiscal 2017 results wherein earnings beat the Zacks Consensus Estimate, while revenues lagged the same.
Share price of this TX-based casual-dining restaurant declined 2.7% in yesterday’s trading session following the release.
Earnings and Revenue Discussion
Adjusted earnings of 94 cents per share surpassed the Zacks Consensus Estimate of 85 cents by 10.6%. However, earnings decreased 6% year over year due to lower revenues and margins.
Quarterly revenues declined 1.7% year over year to $810.6 million due to lower comps, somewhat offset by increased restaurant capacity. Company sales decreased 1.8%, but franchise and other revenues increased 2.6%. Moreover, revenues missed the Zacks Consensus Estimate of $815.2 million by 0.6%.
In the reported quarter, comps declined 2.2% compared with a comps decline of 2.9% 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 $689.6 million, down 2% year over year.
Chili's company-owned comps fell 2.3% due to a 6.2% decline in traffic, partially offset by a 2.9% and 1% improvement in pricing and mix, respectively. Comps compared favorably with the prior-quarter decline of 3.3% and 4.1% in the year-ago quarter.
Comps at its franchised restaurants went down 2.5% compared with a 1.7% decline in the year-ago quarter and 3.5% decrease in the last quarter.
Comps declined 7.1% in international franchised Chilli’s restaurants wider than the year-ago quarter’s decrease of 0.7% and prior-quarter’s decline of 4.2%. However, the same rose in the domestic franchised units by 0.3% as against decline of 2.2% in the year-ago quarter and fall of 3% in the prior quarter.
Domestic comps (including company-owned and franchised) at Chili's declined 1.7% comparing favorably with the prior-quarter decline of 3.2%. The same was down 3.6% in the prior-year quarter.
Maggiano's
Maggiano's sales decreased 0.6% year over year to $101.0 million.
Maggiano's comps fell 1.6% in the quarter due to a 5.4% decline in traffic, partially offset by a 2.4% and 1.4% improvement in pricing and mix, respectively. Comps compared unfavorably with the prior-quarter decline of 0.8% and the year-ago comparable period growth of 0.2%.
Expenses and Margins
Total operating costs and expenses decreased barely 0.1% to $737.8 million from $738.4 million in the year-ago period.
Cost of sales margin improved nearly 120 basis points (bps), primarily reflecting increased menu pricing as well as favorable commodity pricing related to poultry and beef, partially offset by unfavorable menu item mix.
Restaurant labor margin was unfavorable 40 bps in the quarter, primarily due to wage rate increase, partially offset by lower manager bonuses.
Restaurant operating margin, as a percent of company sales, was unfavorable by 40 bps.
Brinker International, Inc. Price, Consensus and EPS Surprise
Brinker reaffirmed its previously issued guidance for fiscal 2017.
It continues to expect earnings per share in the range of $3.05 to $3.15. Notably, the Zacks Consensus Estimate for fiscal 2017 earnings is pegged at $3.33.
Moreover, the company anticipates comps growth to be down in the range of 1.5–2% for the full year, in-line with its previous expectation. Restaurant operating margin is estimated to be down roughly 90 bps year over year on a 52-week basis, as expected earlier.
Zacks Rank & Stocks to Consider
Brinker currently has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include:
Restaurant Brands International, Inc. (QSR - Free Report) currently sports a Zacks Rank #1 (Strong Buy). It posted a positive earnings surprise in each of the last four quarters, with an average beat of 19.20%.
Darden Restaurants, Inc.’s (DRI - Free Report) earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 3.35%. It currently holds a Zacks Rank #2 (Buy).
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Brinker (EAT) Beats on Q3 Earnings, Lags Sales, Stock Down
Brinker International, Inc. (EAT - Free Report) posted mixed third-quarter fiscal 2017 results wherein earnings beat the Zacks Consensus Estimate, while revenues lagged the same.
Share price of this TX-based casual-dining restaurant declined 2.7% in yesterday’s trading session following the release.
Earnings and Revenue Discussion
Adjusted earnings of 94 cents per share surpassed the Zacks Consensus Estimate of 85 cents by 10.6%. However, earnings decreased 6% year over year due to lower revenues and margins.
Quarterly revenues declined 1.7% year over year to $810.6 million due to lower comps, somewhat offset by increased restaurant capacity. Company sales decreased 1.8%, but franchise and other revenues increased 2.6%. Moreover, revenues missed the Zacks Consensus Estimate of $815.2 million by 0.6%.
In the reported quarter, comps declined 2.2% compared with a comps decline of 2.9% 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 $689.6 million, down 2% year over year.
Chili's company-owned comps fell 2.3% due to a 6.2% decline in traffic, partially offset by a 2.9% and 1% improvement in pricing and mix, respectively. Comps compared favorably with the prior-quarter decline of 3.3% and 4.1% in the year-ago quarter.
Comps at its franchised restaurants went down 2.5% compared with a 1.7% decline in the year-ago quarter and 3.5% decrease in the last quarter.
Comps declined 7.1% in international franchised Chilli’s restaurants wider than the year-ago quarter’s decrease of 0.7% and prior-quarter’s decline of 4.2%. However, the same rose in the domestic franchised units by 0.3% as against decline of 2.2% in the year-ago quarter and fall of 3% in the prior quarter.
Domestic comps (including company-owned and franchised) at Chili's declined 1.7% comparing favorably with the prior-quarter decline of 3.2%. The same was down 3.6% in the prior-year quarter.
Maggiano's
Maggiano's sales decreased 0.6% year over year to $101.0 million.
Maggiano's comps fell 1.6% in the quarter due to a 5.4% decline in traffic, partially offset by a 2.4% and 1.4% improvement in pricing and mix, respectively. Comps compared unfavorably with the prior-quarter decline of 0.8% and the year-ago comparable period growth of 0.2%.
Expenses and Margins
Total operating costs and expenses decreased barely 0.1% to $737.8 million from $738.4 million in the year-ago period.
Cost of sales margin improved nearly 120 basis points (bps), primarily reflecting increased menu pricing as well as favorable commodity pricing related to poultry and beef, partially offset by unfavorable menu item mix.
Restaurant labor margin was unfavorable 40 bps in the quarter, primarily due to wage rate increase, partially offset by lower manager bonuses.
Restaurant operating margin, as a percent of company sales, was unfavorable by 40 bps.
Brinker International, Inc. Price, Consensus and EPS Surprise
Brinker International, Inc. Price, Consensus and EPS Surprise | Brinker International, Inc. Quote
Fiscal 2017 Guidance
Brinker reaffirmed its previously issued guidance for fiscal 2017.
It continues to expect earnings per share in the range of $3.05 to $3.15. Notably, the Zacks Consensus Estimate for fiscal 2017 earnings is pegged at $3.33.
Moreover, the company anticipates comps growth to be down in the range of 1.5–2% for the full year, in-line with its previous expectation. Restaurant operating margin is estimated to be down roughly 90 bps year over year on a 52-week basis, as expected earlier.
Zacks Rank & Stocks to Consider
Brinker currently has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include:
Restaurant Brands International, Inc. (QSR - Free Report) currently sports a Zacks Rank #1 (Strong Buy). It posted a positive earnings surprise in each of the last four quarters, with an average beat of 19.20%.
YUM! China Holdings, Inc. (YUMC - Free Report) has seen current year earnings estimates rise 5.2% over the last 60 days. It also sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Darden Restaurants, Inc.’s (DRI - Free Report) earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 3.35%. It currently holds a Zacks Rank #2 (Buy).
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>