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Bull of the Day: Texas Roadhouse (TXRH)

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Texas Roadhouse (TXRH - Free Report) is a full-service, casual dining restaurant chain known for its seasoned and aged steaks that are hand cut daily, and rustic, Texas-themed laidback décor. The company currently has 540 company-owned locations and another 97 franchised stores primarily in suburban and rural areas throughout the U.S.

Q1 Earnings Recap

Texas Roadhouse posted strong sales growth during the first-quarter. Comparable restaurant sales jumped 18.5% year-over-year, with 13% traffic growth and a 5.5% increase in average check.

Total revenue grew 22.7% over the prior year to over $800 million, helped in part to the company’s thriving to-go and meal kit business. To-go sales made up 22% of average weekly store sales in Q1, proving how well-liked the option is regardless of loosening indoor dining restrictions.

Diluted EPS increased to $0.91 per share, beating our consensus estimate; TXRH’s bottom line is now back to reaching new all-time highs after a muted 2020.

CFO Tonya Robinson said TXRH updated its full-year inflation forecast to roughly 4%, as the company works around supply and demand uncertainty, particularly for proteins and oils.

“Our operating results have exceeded even pre-pandemic levels thanks to our operators’ ability to navigate a number of factors, including the easing of dining room capacity restrictions, guest excitement to get back into our restaurants and the continued strength of our To-Go sales. Going forward, our primary focus will be ensuring that our guests continue to have a legendary experience each and every time they choose us,” said CEO and President Jerry Morgan.

TXRH Breaks Out

 

Shares of Texas Roadhouse have been climbing back from their pandemic lows, up 124% over the past one-year period compared to the S&P 500’s gain of 45.8%. Earnings estimates have been rising too, and TXRH is a Zacks Rank #1 (Strong Buy) right now.

For fiscal 2021, 10 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $2.38 to $3.26 per share, reflecting bottom-line growth of over 624%. Analysts are bullish about 2022 as well, and TXRH is expected to continue generating strong profits.

Looking ahead, management is confident about Texas Roadhouse’s short and long-term growth path. The company plans to open 25 to 30 new locations this year, and reiterated weekly store growth of 4% to 5%.

And good news for investors: TXRH recently announced that it has reinstated its quarterly dividend after suspending the payout last March to help preserve cashflow. Shareholders of record as of May 19 will receive a dividend of $0.40 on June 4. Shares now yield 1.65% on an annual basis.

If you’re an investor searching for a restaurant stock to add to your portfolio, make sure to keep TXRH on your shortlist.

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