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Brinker's (EAT) Stock on Fire: What's Behind the Rally?

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Shares of Brinker International, Inc. (EAT - Free Report) have soared 125.3% in the past six months, compared with the industry’s rally of 23.6%. The company is benefiting from sales-building initiatives including streamlining of menu, innovation, strengthening its value proposition, better food presentation, advertising campaigns, kitchen system optimization and introduction of better service platform.

Moreover, an upward revision in earnings estimates for fiscal 2021 reflects analysts’ confidence in the Zacks Rank #1 (Strong Buy) company’s potential. Over the past 30 days, the Zacks Consensus Estimate for its fiscal 2021 earnings has moved up 31.4% to $2.76. Let’s delve deeper and find out factors driving the stock.

Chili’s Driving Growth

Chili’s turn-around strategies yielded positive results with traffic and sales moving in the positive direction. It is focused on simplifying Chili’s core menu by improving recipes, strengthening value proposition with higher-quality ingredients, and new cooking techniques to deliver better food at even more compelling price points. Chili’s continues to lead in casual dining sector, ranking as the number one brand in the KNAPP-TRACK index each month in first-quarter fiscal 2021. Chili’s reported positive traffic in the month of September, which is quite encouraging considering the fact that major states like California and New Jersey are still operating with limited dining capacity. Chili’s is likely to report positive traffic in second-quarter fiscal 2021.

Expansion Bodes Well

Brinker is one of the few fast-casual restaurant chains that has been expanding despite sluggish economic development. Management is gearing up for international expansion, especially in the faster growing emerging markets. Notably, the company is on the lookout to expand brand in existing markets and enter new ones. In fiscal 2018, 2019 and 2020, the company had opened 34, 23 and 31 restaurants, respectively, globally. In the first-quarter fiscal 2021, the company opened seven new restaurants. Nonetheless, the company anticipates inaugurating 18-21 restaurants in fiscal 2021.

Impressive Earnings Surprise History

The company reported first-quarter fiscal 2021 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. While the bottom line beat the consensus estimate for the fourth straight quarter, the top line outpaced the same for third consecutive quarter. Moreover, estimates for both current quarter and year have witnessed sharp upward revisions in the past 30 days.

Other Key Picks

Some other top-ranked stocks, which warrant a look in the same space, include Texas Roadhouse, Inc. (TXRH - Free Report) , Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) and Fiesta Restaurant Group, Inc. (FRGI - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Roadhouse has a trailing four-quarter earnings surprise of 27%, on average.

Red Robin has a three-five year earnings per share growth rate of 10%.

Fiesta Restaurant’s 2021 earnings are expected to soar 418.8%.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

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