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Bull of the Day: Brinker (EAT)

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Restaurant stocks were red hot from 2013 through the first quarter of 2015. Those millennials were out there spending money on experiences instead of goods and services and that led to lots of money being thrown around for dining. The market caught wind of it and rewarded restaurant stocks. But this year has been a different story as these stocks have suffered. Perhaps that’s all about to change.

Today’s Bull of the Day is one of those restaurant stocks, Brinker (EAT - Free Report) . Brinker International, Inc., together with its subsidiaries, owns, develops, operates, and franchises casual dining restaurants worldwide. As of June 28, 2017, it owned, operated, or franchised 1,674 restaurants comprising 1,622 restaurants under the Chili's Grill & Bar brand name; and 52 restaurants under the Maggiano's Little Italy brand name. 

Take a quick look at the Price, Consensus and EPS Surprise chart on Zacks.com and you’ll see the real reason why the stock has come down from $60. Consensus estimates had been rising and showing solid growth year over year. However, in the second half of 2015, future estimates started to come down rather dramatically. So much so that 2017 estimates are now at the same level of 2015’s numbers. That stagnation isn’t something that Wall Street rewards.

There is a glimmer of hope right now. Looking out towards next year’s EPS number, analysts are starting to inch their estimates higher. Ninety days ago, analysts were looking for $3.20 out of next year and now, that number has increased to $3.30. That represents incremental EPS growth over the current year’s $3.24 Zacks Consensus Estimate.

The stock chart is still pretty darn ugly, with the 50-day providing upside resistance since the stock broke down below it in early May. The 200-day sits nearly 30% higher than the current price. There is a lot of negativity however the recent swing low of $30.41 was off the 52-week low of $29.50 the stock hit on September 7th. If it can find a way to leapfrog the 50-day moving average it would be a huge step in the right direction. Investors looking to nibble on this stock with a P/E under 10 can buy here with stops south of the 52-week low and a price target at the 200-day, giving a nice risk versus reward setup.

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