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Factors Setting the Tone for Brinker (EAT) in Q2 Earnings

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Brinker International EAT is scheduled to report second-quarter fiscal 2020 results on Jan 29. In the last reported quarter, the company’s earnings were in line with the Zacks Consensus Estimate, while revenues lagged the same.

How are Estimates Faring?

The Zacks Consensus Estimate for fiscal second-quarter earnings is pegged at 96 cents per share, indicating an improvement of 7.9% from the year-ago quarter’s reported figure. Over the past 30 days, the company’s earnings estimates have remained unchanged. For revenues, the consensus mark is pegged at nearly $882.5 million, suggesting an 11.6% increase from the prior-year quarter’s reported figure.

Factors at Play

The company is likely to have benefited from robust sales at Chili's in the quarter under review. The Zacks Consensus Estimate for sales at Chili's suggests an increase of 14.7% year over year to $734 million.  Notably, revenues at Maggiano’s are predicted to be $121 million, almost flat year over year.

The company’s sales-building initiatives and increase in the global guest count are likely to have contributed to its comparable sales (comps) in second-quarter fiscal 2020. The first quarter of fiscal 2020 marked its 6th and 7th consecutive quarter of positive comparable restaurant sales and traffic growth, respectively.

Moreover, introduction of better service platform, customization of menu according to local customer tastes, reimaging of restaurants, efficient marketing and promotions, improved service and increased convenience via delivery have been boosting sales.

However, costs related to various sales-boosting initiatives, including advertising expenses and commodity inflation, are expected to continue hurting margins.

What the Zacks Model Unveils

Our proven model does not conclusively predict earnings beat for Brinker International this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Brinker International has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Zacks Restaurant space that investors may consider as our model shows that these have the right combination of elements to deliver an earnings beat this season.

Denny's Corporation DENN has an Earnings ESP of +5.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +4.92% and a Zacks Rank #2.

Chipotle Mexican Grill, Inc. CMG has an Earnings ESP of +3.49% and a Zacks Rank #2.

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