It has been about a month since the last earnings report for Brinker International (EAT Quick QuoteEAT - Free Report) . Shares have lost about 10.3% 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 Q3 Earnings Miss Estimates, Revenues Surpass

Brinker reported mixed third-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. The top and the bottom line increased on a year-over-year basis.

Earnings & Revenue Discussion

In the quarter under review, adjusted earnings per share (EPS) came in at 92 cents missing the Zacks Consensus Estimate of 99 cents. In the prior-year quarter, the company had reported an adjusted EPS of 78 cents.

During the fiscal third quarter, total revenues of $980.4 million beat the Zacks Consensus Estimate of $976 million by 0.4%. The top line surged 18.3% on a year-over-year basis. The company gained from the solid performance of Chili's and Maggiano's.

Chili's

Chili’s revenues in the fiscal third quarter increased 15.3% year over year to $879.6 million. The upside was primarily driven by an increase in dining room sales backed by higher traffic, price increases and a favorable mix. Moreover, the acquisition of 66 restaurants in fiscal 2022 (previously owned by franchisees) added to the positives.

Chili's company restaurant expenses (as a percentage of company sales) in the fiscal third quarter increased to 87.5% year over year from 85.7% reported in the prior-year quarter. The upside can be attributed to a rise in restaurant labor costs, which includes wage rates, training and overtime. Higher expenses related to commodities, utilities as well as repairs and maintenance pushed the costs higher. However, this was partially offset by sales leverage and favorable menu pricing. Chili's company-owned traffic in the quarter increased 2.1% year over year compared with the 4% growth reported in the prior-year quarter.
 
The segment’s company-owned comps increased 10.3% in the fiscal third quarter from the year-ago quarter’s levels.

At Chili's, domestic comps (including company-owned and franchised) rose 9.9% year over year compared with a 0.6% rise reported in the prior-year quarter.

Maggiano's

Maggiano's sales soared 54.1% year over year to $100.8 million, primarily due to an increase in dining and banquet room sales. Comps increased 50.5% year over year. Traffic in the quarter rose 28.9% year over year, against a decline of 21.6% reported in the prior-year quarter.

Maggiano's company restaurant expenses (as a percentage of company sales) in the fiscal third quarter were 89.9% compared with 91.2% reported in the prior-year quarter. The downside was primarily due to sales leverage and increased menu pricing. This was negated by increased restaurant labor costs, commodity pricing and other operational expenses.

Operating Results

Total operating costs and expenses in the fiscal third quarter came in at $931 million compared with $776.2 million reported in the year-ago quarter. Restaurant operating margin — as a percentage of company sales — was 12.2% compared with 13.9% reported in the prior-year quarter.

Balance Sheet

As of Mar 30, 2022, cash and cash equivalents amounted to $12.9 million compared with $63.6 million as of Mar 24, 2021.

Long-term debt as of Mar 30, 2022, came in at $987.9 million compared with $1,047.3 million as of Dec 29, 2021. Total shareholders’ deficit in the reported quarter came in at ($311.2) million compared with ($327.4) million reported in the previous quarter.

Fiscal 2022 Outlook

For fiscal 2022, The company anticipates total revenues in the range of $3.75-$3.85 billion. Capital expenditures are expected in the range of $160-$165 million. The company expects fiscal 2022 diluted EPS in the range of $3.05-$3.30.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -17.35% due to these changes.

VGM Scores

At this time, Brinker International has a great 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 quintile 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. It's no surprise Brinker International has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Brinker International belongs to the Zacks Retail - Restaurants industry. Another stock from the same industry, Starbucks (SBUX Quick QuoteSBUX - Free Report) , has gained 2.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Starbucks reported revenues of $7.64 billion in the last reported quarter, representing a year-over-year change of +14.5%. EPS of $0.59 for the same period compares with $0.62 a year ago.

Starbucks is expected to post earnings of $0.78 per share for the current quarter, representing a year-over-year change of -22.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -14.7%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Starbucks. Also, the stock has a VGM Score of D.