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Why Is Brinker International (EAT) Down 1.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Brinker International (EAT - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Brinker International due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Brinker Q4 Earnings Miss, Revenues Beat Estimates

Brinker International, Inc. reported mixed fourth-quarter fiscal 2021 results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. The bottom line missed the consensus mark after beating the same for sixth straight quarter. Both the metrics improved year over year. Following the results, the company’s shares moved up 1.3% during the trading hours on Aug 18.

Earnings & Revenue Discussion

The company reported adjusted earnings per share of $1.68, missing the Zacks Consensus Estimate of $1.70. Brinker had reported adjusted loss of 88 cents in the year-ago quarter.

Quarterly revenues of $1,008.6 million beat the consensus mark of $998 million. The top line improved 79.1% on a year-over-year basis.

Chili's

Chili’s revenues in the fiscal fourth quarter jumped 72.9% year over year to $914 million, primarily due to increase in dining room sales, robust delivery sales and positive impact of additional operating week. However, this was partly offset by decline in To-Go sales.

Chili's company restaurant expenses (as a percentage of company sales) in the fiscal fourth quarter contracted to 82.9% year over year from 92.2%. The decrease was primarily due to sales leverage, decline in advertising expenses, lower insurance, and decrease in To-Go supplies expenses. The decline was overshadowed by increased manager and hourly wages and bonuses, higher repairs and maintenance expenses, increase in utilities expenses, and unfavorable commodity pricing. Traffic in the quarter rose 51.2% year over year.

In fourth-quarter fiscal 2021, company-owned comps rose 59.8% year over year. The segment’s company-owned comps increased 8.5% in the fourth quarter, compared with the same period in 2019.

Comps at Chili's franchised restaurants increased 104.6% against a decline of 32.2% in the year-ago quarter. At international franchised Chili’s restaurants, the same increased a whopping 159.1% versus the year-ago quarter’s decrease of 66.1%. Meanwhile, at the U.S. franchised units, comps climbed 84.9% against the year-ago quarter’s slump of 39.9%.

At Chili's, domestic comps (including company-owned and franchised) surged 62.1% year over year against the prior-year quarter’s decrease of 33%.

Maggiano's

Maggiano's sales soared 190.8% year over year to $94.6 million, primarily due to increase in dining and banquet room sales, higher delivery sales and positive impact of additional operating week. However, the gain was offset by decrease in To-Go sales. Comps increased 147.9% year over year. Traffic in the quarter rose 81.7% year over year.

Maggiano's company restaurant expenses (as a percentage of company sales) in the fiscal fourth quarter came in at 85%, compared with 115.5% in the prior-year quarter. The decrease was primarily due to sales leverage and lower To-Go supplies expenses. The decline was negated by increased manager and hourly wages and bonuses, higher repairs and maintenance expenses, and rising advertising and insurance expenses.

Operating Results

Total operating costs and expenses contracted to $908 million from $616.4 million in the year-ago quarter. Moreover, restaurant operating margin — as a percentage of company sales — was 16.9% compared with 6.4% in the prior-year quarter.

Balance Sheet

As of Jun 30, 2021, cash and cash equivalents amounted to $23.9 million compared with $43.9 million as on Jun 24, 2020.

Long-term debt was $917.9 million as of Jun 30, 2021, compared with $1,208.5 million on Jun 24, 2020. Total shareholders’ deficit in the reported quarter came in at ($303.3) million compared with ($479.1) million as of Jun 24, 2020.

Fiscal 2022

Due to the uncertainties stemming from the pandemic and concerns regarding the rise in Delta variant cases, the company provided limited financial outlook for fiscal 2022.

For fiscal 2022, the company expects capital expenditures to be $155.0-$165.0 million. Commodity and labor inflation is anticipated to be in the mid-single digits.




 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -14.63% due to these changes.

VGM Scores

Currently, Brinker International has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Brinker International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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