Brinker International EAT shares plunged over 14% this morning following the release of mixed results for its fiscal fourth quarter. Despite this downturn, Brinker’s stock has soared by an impressive 60% this year, buoyed by operations at Chili’s Bar & Grill and Maggiano’s Little Italy.
With such a stellar year-to-date performance, investors may be pondering whether the recent dip presents a buying opportunity. Brinker has significantly outperformed the broader indexes and the Zacks Retail-Restaurants Market, including standout peers like El Pollo Loco LOCO and Texas Roadhouse TXRH.
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A Peek at Brinker’s Q4 Results
Brinker’s Q4 sales hit $1.2 billion, marking a 12% year-over-year increase, leapfrogging over estimates of $1.15 billion by 4%. Nevertheless, Q4 EPS of $1.61 fell short of expectations by 2%, despite a robust 15% surge from the comparative quarter. Noteworthy, Brinker had surpassed earnings expectations for seven consecutive quarters and boasts an average EPS surprise of a whopping 211.01% in its last four quarterly reports.
The upswing in menu pricing at Chili’s played a significant role in driving Brinker’s performance, with the company reporting continued outperformance in sales and foot traffic within the industry. In total, Brinker’s fiscal 2024 sales surged by 7% to $4.41 billion, with EPS skyrocketing by 45% to $4.10 from $2.83 per share in FY23.
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Bright Prospects: Favorable Guidance
Looking ahead to FY25, Brinker anticipates total sales to range between $4.55 billion and $4.62 billion, surpassing the current Zacks Consensus of $4.51 billion by 3%. Brinker has guided EPS in the range of $4.35 to $4.75, with its upper limit aligning with estimates of $4.73 per share, reflecting a 13% growth.
Captivating Valuation
Trading around $60, Brinker’s stock bears a forward earnings multiple of 14.8X, presenting an enticing discount compared to the S&P 500’s 22.9X. Moreover, EAT trades notably below the Zacks Retail-Restaurants Industry average of 25X forward earnings, with Texas Roadhouse at 26.9X and El Pollo Loco at 15.7X.
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Key Takeaways
At present, Brinker’s stock proudly flaunts a Zacks Rank #1 (Strong Buy). The recent post-earnings dip could potentially be a golden opportunity, considering Brinker’s alluring valuation and promising growth prospects. Therefore, maintaining this strong buy rating hinges on the trajectory of earnings estimate revisions in the imminent weeks following the Q4 report.
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