Brinker International, Inc. (EAT - Analyst Report) recently announced that it has entered into a $300 million worth accelerated share repurchase agreement with Bank of America (BoA). This reflects the Texas-based restaurant chain’s sound financial position and favorable prospects.
Per the deal, Brinker will pay BoA $300 million in cash and will initially receive close to 4.6 million shares of the company’s common stock. Settlement of the agreement is slated to be completed by the end of Brinker’s fiscal 2017 third quarter.
The company increased its share buyback authorization limit by $150 million to $455 million in August this year. At the same time, it announced its plan to leverage in the range of $250–$300 million and use the proceeds for buyback.
Pursuant to this announcement, on Sep 13, Brinker offered $350 million principal amount of senior unsecured notes due in the year 2024. Net proceeds from the notes will be used for the repurchase of $300 million of stock and for the repayment of $50 million of outstanding debt under the company’s revolving credit facility. Remaining proceeds, if any, will be used for general corporate purposes.
Further, recently the company announced pricing of the 5.0% Senior Notes at 100% and also declared the closing of the offering.
Over the fiscal year 2016, the company repurchased common stock in all four quarters. In the first quarter it repurchased 0.9 million shares for $51.1 million. In the second and third quarter it bought back 1.9 million and 2.6 million shares, respectively, worth $89 million and $126.1 million. In the fourth quarter, the company repurchased 0.4 million shares of its common stock for $18.7 million bringing the total to 5.8 million shares and $284.9 million year-to-date.
The company also expects to continue repurchasing shares in the open market, depending on the prevailing market and other conditions.
Moreover, on Aug 18, Brinker announced a quarterly cash dividend of $0.34 per share, a 6.3% increase over the prior-year quarterly dividend of $0.32 per share.
The company’s dividend payout and aggressive share repurchase policies are expected to boost investors’ confidence. Brinker’s strategy to return wealth to shareholders reflects its growth potential and stable liquidity position.
BRINKER INTL Price
Brinker currently has a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Papa John’s International, Inc. (PZZA - Analyst Report) , Wingstop, Inc. (WING - Snapshot Report) and Carrols Restaurant Group, Inc. (TAST - Snapshot Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Papa John’s has an average earnings surprise history of 7.81% over the past four quarters, wherein it has surpassed expectations each time. Its current year growth estimate is pegged at 17.4%, much higher than the industry average of 9.4%.
Wingstop has received seven upward revisions over the last 60 days. It beat estimates in each of the trailing four quarters with an average positive earnings surprise of 15.46%
Carrols has recorded an average positive earnings surprise of 221.67% over the past four quarters, with a beat in each. Additionally, its growth estimate for the full year 2016 is pegged at 55.3% compared with the industry average of 8.1%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »