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Brinker International (EAT) Down 22.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Brinker International (EAT - Free Report) . Shares have lost about 22.3% 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 catalysts.
Brinker's Q2 Earnings Beat, Revenues Miss Estimates
Brinker International, reported mixed second-quarter fiscal 2020 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. The top line lagged the consensus mark for the third straight quarter.
Adjusted earnings of $1.01 per share surpassed the consensus estimate of 97 cents and also increased 13.5% from the year-ago quarter, mainly due to improved operating performance. Quarterly revenues totaled $847.5 million, which missed the consensus mark of $883 million but improved 11.3% on a year-over-year basis. Its traffic-building strategies and revenues generated from the acquisition of 116 Chili’s restaurants aided the top line.
Brand Performances
Brinker primarily engages in ownership, operation, development and franchising of various restaurant brands under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s).
Chili's
Revenues at Chili’s totaled $728.4 million in the reported quarter, up 13.7% from the prior-year period. The upside was driven by an increase in off-premise sales, led by comparable restaurant sales and revenues generated from the acquisition of 116 Chili's restaurants.
The brand’s company-owned comps rose 2%, which marked Brinker’s seventh consecutive quarter of positive comps. In first-quarter fiscal 2020, company-owned comps rose 2.9% from the prior-year quarter.
Comps at Chili's franchised restaurants decreased 0.4% compared with 0.8% decline registered in the year-ago quarter. At international franchised Chili’s restaurants, the same fell 0.9% compared with the year-ago quarter’s decline of 6.5%. Meanwhile, at the U.S. franchised units, comps increased 0.2% compared with 3.4% growth in the year-ago quarter.
At Chili's, domestic comps (including company-owned and franchised) grew 1.7% compared with the first quarter’s increase of 3%.
Maggiano's
Maggiano's sales decreased 1.5% year over year to $119.1 million, primarily due to a decline in comparable restaurant sales and adverse weather conditions.
Comps dropped 1.4% year over year.
Operating Results
Total operating costs and expenses jumped roughly 11.4% to $825.8 million from $741.1 million in the year-ago quarter. However, restaurant operating margin — as a percentage of company sales — was 12.7% compared with 12.4% in the prior-year quarter.
Balance Sheet
As of Dec 25, 2019, cash and cash equivalents amounted to $12 million compared with $16.2 million on Dec 26, 2018.
Long-term debt was $1.3 billion as of Dec 25, 2019 compared with $1.2 billion on Jun 26, 2019. Total shareholders’ deficit in the reported quarter was $568.9 million compared with $778.2 million as of Jun 26, 2019.
Management approved a quarterly dividend of 38 cents per share of the company’s common stock in the fiscal second quarter, which is payable on Mar 26 to its shareholders of record on Mar 6.
Fiscal 2020 Guidance
The company raised its fiscal 2020 guidance. It expects earnings per diluted share in the range of $4.25 to $4.45. The Zacks Consensus Estimate for the same is pegged at $4.24 per share.
The company also anticipates revenues to be up approximately 9.0% to 10.0% primarily due to the acquisition of the 116 Chili's restaurants. Comparable restaurant sales are pegged at 1.75% to 2.5% and capital expenditures between $140 million and $150 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Brinker International has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Brinker International has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Brinker International (EAT) Down 22.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Brinker International (EAT - Free Report) . Shares have lost about 22.3% 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 catalysts.
Brinker's Q2 Earnings Beat, Revenues Miss Estimates
Brinker International, reported mixed second-quarter fiscal 2020 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. The top line lagged the consensus mark for the third straight quarter.
Adjusted earnings of $1.01 per share surpassed the consensus estimate of 97 cents and also increased 13.5% from the year-ago quarter, mainly due to improved operating performance. Quarterly revenues totaled $847.5 million, which missed the consensus mark of $883 million but improved 11.3% on a year-over-year basis. Its traffic-building strategies and revenues generated from the acquisition of 116 Chili’s restaurants aided the top line.
Brand Performances
Brinker primarily engages in ownership, operation, development and franchising of various restaurant brands under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s).
Chili's
Revenues at Chili’s totaled $728.4 million in the reported quarter, up 13.7% from the prior-year period. The upside was driven by an increase in off-premise sales, led by comparable restaurant sales and revenues generated from the acquisition of 116 Chili's restaurants.
The brand’s company-owned comps rose 2%, which marked Brinker’s seventh consecutive quarter of positive comps. In first-quarter fiscal 2020, company-owned comps rose 2.9% from the prior-year quarter.
Comps at Chili's franchised restaurants decreased 0.4% compared with 0.8% decline registered in the year-ago quarter. At international franchised Chili’s restaurants, the same fell 0.9% compared with the year-ago quarter’s decline of 6.5%. Meanwhile, at the U.S. franchised units, comps increased 0.2% compared with 3.4% growth in the year-ago quarter.
At Chili's, domestic comps (including company-owned and franchised) grew 1.7% compared with the first quarter’s increase of 3%.
Maggiano's
Maggiano's sales decreased 1.5% year over year to $119.1 million, primarily due to a decline in comparable restaurant sales and adverse weather conditions.
Comps dropped 1.4% year over year.
Operating Results
Total operating costs and expenses jumped roughly 11.4% to $825.8 million from $741.1 million in the year-ago quarter. However, restaurant operating margin — as a percentage of company sales — was 12.7% compared with 12.4% in the prior-year quarter.
Balance Sheet
As of Dec 25, 2019, cash and cash equivalents amounted to $12 million compared with $16.2 million on Dec 26, 2018.
Long-term debt was $1.3 billion as of Dec 25, 2019 compared with $1.2 billion on Jun 26, 2019. Total shareholders’ deficit in the reported quarter was $568.9 million compared with $778.2 million as of Jun 26, 2019.
Management approved a quarterly dividend of 38 cents per share of the company’s common stock in the fiscal second quarter, which is payable on Mar 26 to its shareholders of record on Mar 6.
Fiscal 2020 Guidance
The company raised its fiscal 2020 guidance. It expects earnings per diluted share in the range of $4.25 to $4.45. The Zacks Consensus Estimate for the same is pegged at $4.24 per share.
The company also anticipates revenues to be up approximately 9.0% to 10.0% primarily due to the acquisition of the 116 Chili's restaurants. Comparable restaurant sales are pegged at 1.75% to 2.5% and capital expenditures between $140 million and $150 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Brinker International has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Brinker International has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.