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Brinker's (EAT) Q2 Earnings Beat Estimates, Revenues Lag

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Brinker International, Inc. (EAT - Free Report) posted mixed results in second-quarter fiscal 2018, with earnings surpassing the Zacks Consensus Estimate and revenues lagging the same.

Adjusted earnings of 87 cents beat the consensus estimate of 71 cents by 22.5%. The bottom line increased 22.5% from the year-ago quarter, primarily driven by favorable tax reform impact and Maggiano’s strong holiday season sales.

Quarterly revenues, however, declined 0.6% year over year to $766.4 million. Revenues also missed the consensus estimate of $771.4 million by 0.6%. Company sales totaled $742.7 million, down 0.8 % from the year-ago quarter.

Brinker International, Inc. Price, Consensus and EPS Surprise


Shares moved up nearly 1% in after-hours trading session following the earnings release. However, over the past six months, the company’s shares have rallied 2.9%, underperforming the industry’s 10.8%.

Apart from the favorable impact of tax benefits on earnings, management is optimistic about the sales-building initiatives. The company is focused on menu innovation and providing improved digital services that are expected to drive traffic and comps, both at Chili’s and Maggiano’s. 

Let’s take a closer look at the Q2 numbers:

Brand Performances

Brinker primarily engages in the ownership, operation, development and franchising of various restaurant brands under the names Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s).


Chili’s reported company sales of $623.6 million in the quarter, down 1.3% from the prior-year quarter owing to declining comps.

The brand’s company-owned comps fell 1.5% due to a 4.4% decline in traffic, partially offset by a 2.3% and 0.6% improvement in pricing and mix, respectively. However, comps compared favorably with the prior-quarter decline of 3.4% and 3.3% drop in the year-ago quarter.

Comps at Chili's franchised restaurants went down 1% compared with a 3.5% decline in the year-ago quarter and 4.1% drop in the last quarter.

In International franchised Chili’s restaurants, comps inched up 0.1% comparing favorably with the year-ago quarter’s decline of 4.2% and the prior-quarter’s fall of 7.9%. Meanwhile, the same fell in the domestic franchised units by 1.7%, same as that in the last quarter. However, the decline was narrower than the 3% fall in the year-ago quarter.

At Chili's, domestic comps (including company-owned and franchised) declined 1.6%, narrower than the prior-quarter’s drop of 3% and the year-earlier quarter’s decline of 3.2%.


Maggiano's company sales rose 2.1% year over year to $119.1 million, primarily owing to an increase in comps.

Comps grew 1.8% in the quarter on a 1.1% increase in both pricing and mix, partially offset by a 0.4% decline in traffic. Markedly, comps compared favorably with the prior-quarter’s decline of 2.6% and the year-ago quarter’s fall of 0.8%.

Operating Results

Total operating costs and expenses increased 0.3% to nearly $712 million from $709.5 million in the year-ago quarter. While cost of sales margin expanded 10 basis points (bps), restaurant labor margin increased 40 bps year over year.

Restaurant operating margin, as a percentage of company sales, declined 20 bps. Net income in the quarter fell 26.9% to $25.4 million from the year-ago quarter.

Balance Sheet

As of Dec 27, 2017, cash and cash equivalents were $14.7 million as compared with nearly $9 million on Sep 27, 2017.

Long-term debt was $1.36 billion as of Dec 27, 2017, compared with $1.35 billion as of Sep 27, 2017.

Capital expenditures as of Dec 27, 2017, were $48.6 million while the same was $22.5 million as of Sep 27, 2017.

Free cash flow was $71.1 million as of Dec 27, 2017, up from $27.7 million as of Sep 27, 2017.

Total shareholders’ deficit in the quarter was $552.9 million, compared with $539 million in the last reported quarter.

2018 Guidance

Brinker expects adjusted earnings in the range of $3.42 to $3.52, including the effective rate impact of the Tax Act.

Zacks Rank & Peer Releases

Brinker carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McDonald's (MCD - Free Report) posted fourth-quarter 2017 adjusted earnings per share of $1.71, surpassing the consensus mark of $1.59 by 7.5%. Revenues of $5.34 billion beat the consensus mark of $5.26 billion by 1.5%.

Darden Restaurants (DRI - Free Report) reported second-quarter fiscal 2018 earnings of 73 cents per share, outpacing the consensus estimate by 4.3%. Revenues surpassed the Zacks Consensus Estimate by a slight margin.

Sonic (SONC - Free Report) announced first-quarter fiscal 2018 earnings of 30 cents, surpassing the consensus estimate of 25 cents by 20%. Total revenues of $105 million missed the Zacks Consensus Estimate of $106 million by 1%.

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