Brinker International (EAT), the operator of popular restaurant chains Chili’s Bar & Grill and Maggiano’s Little Italy, saw its shares drop over 14% this morning following the release of its fiscal fourth-quarter results. This dip comes despite a remarkable year-to-date performance, with the stock boasting over 60% gains. Investors are now wondering if this post-earnings decline represents a buying opportunity.
Brinker’s Q4 sales reached $1.2 billion, a 12% year-over-year increase that surpassed analysts’ estimates of $1.15 billion. However, earnings per share (EPS) came in at $1.61, slightly missing expectations of $1.65, although still demonstrating a significant 15% jump from the previous year’s quarter. It’s noteworthy that Brinker had consistently exceeded earnings expectations for seven consecutive quarters, boasting an impressive average EPS surprise of 211.01% in the last four quarterly reports.
The company attributed its strong performance to increased menu pricing at Chili’s, noting that they continue to outperform the industry in both sales and traffic. Overall, Brinker’s total sales for fiscal 2024 climbed 7% to $4.41 billion, while EPS soared 45% to $4.10 compared to $2.83 per share in fiscal 2023.
Looking ahead, Brinker forecasts total sales in the range of $4.55-$4.62 billion for fiscal 2025, surpassing the current Zacks Consensus estimate of $4.51 billion, representing a 3% growth. The company also guided EPS to be between $4.35-$4.75, with the high end aligning with estimates of $4.73 per share, signifying a 13% growth.
Currently trading around $60, Brinker’s stock boasts a forward earnings multiple of 14.8X. This represents an attractive discount compared to the S&P 500’s 22.9X. Moreover, EAT trades significantly lower than its Zacks Retail-Restaurants Industry average of 25X forward earnings, with Texas Roadhouse at 26.9X and El Pollo Loco at 15.7X.
As of now, Brinker’s stock holds a Zacks Rank #1 (Strong Buy). The post-earnings dip might present a compelling buying opportunity considering its attractive valuation and robust growth prospects. However, maintaining this strong buy rating will likely depend on the trend of earnings estimate revisions in the coming weeks following the Q4 report.
