Back to top

Analyst Blog

Brinker International Inc. (EAT - Analyst Report) recently revised its guidance for fiscal 2013 and also updated its long-term outlook.

Revised Fiscal 2013 Guidance

The company now expects that its adjusted earnings per share for fiscal 2013 will be at the lower end of its previously provided guidance of $2.30–$2.45. Diluted weighted average shares outstanding are now projected between 73 and 75 million.

The company also reduced its comparable restaurant sales (comps) growth guidance from 2%–3% to 1% in fiscal 2013. Comps are likely to be affected by lower traffic, higher fuel costs and soft economic condition. However, the company has retained its outlook for operating margin, which is likely to grow by 100 basis points (bps) year over year.

Improved commodity inflation and reduced food prices would help the company to increase its cost of sales by 50 bps. Moreover, for fiscal 2013, the company expects restaurant labor to be up 50 bps, driven by Brinker’s enhanced efficiency.

Year to date, the comps at Chili's were down 2.2% while the same at Maggiano's remained consistent.

Long-term Outlook

The company is aiming to double its fiscal 2012 earnings to $4.00 per share by fiscal 2017. In this regard, the company is trying to grow its earnings by 10%-15% annually.

The company has taken various strategic initiatives, including cost-cutting approach, slower unit growth and top-line improvement to enhance its business, moving ahead.

Brinker’s long-term revenues growth target is 3% – 5%, which is partially based on 2%-3% domestic as well as 3% international comps growth. Moreover, the company also expects that its Chili's and Maggiano's units in U.S. will grow by 1%-2% and 5%-10%, respectively. The company is also planning to increase its margins by 1% annually with the help of lowered labor and restaurant costs.

The company is also intending to repurchase nearly $1 billion shares over the next five years with its strong cash position.

Brinker recently reported second-quarter fiscal 2013 adjusted earnings of 50 cents per share, up 6.4% from the year-ago quarter. The annual surge in the earnings was due to the company’s higher margins. During the quarter, revenues have increased 1.2% year over year to $689.8 million, driven by system-wide comparable restaurants sales growth of 1.5%.

Brinker currently retains a Zacks Rank #3 (Hold). Another restaurateur Red Robin Gourmet Burgers Inc.’s (RRGB - Analyst Report) adjusted earnings in the fourth quarter of 2012 were way ahead of the Zacks Consensus Estimate as well as the year-ago quarter’s earnings. Red Robin Gourmet currently carries a Zacks Rank #1 (Strong Buy).

Other restaurant companies like Krispy Kreme Doughnuts, Inc. (KKD - Snapshot Report) and Burger King Worldwide, Inc both with a Zacks Rank #2 (Buy) are expected to perform well, going ahead.

Please login to Zacks.com or register to post a comment.