A month has gone by since the last earnings report for Brinker International (EAT). Shares have added about 3.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Brinker International due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Brinker Q4 Earnings Lag Estimates, Revenues Beat
Brinker reported mixed fourth-quarter fiscal 2024 results, with earnings missing the Zacks Consensus Estimate but revenues beating the same. However, the top and the bottom lines increased on a year-over-year basis.
Earnings & Revenue Discussion
In the quarter under review, Brinker reported adjusted earnings per share (EPS) of $1.61, missing the Zacks Consensus Estimate of $1.65. The company reported an adjusted EPS of $1.39 in the prior-year quarter.
In the fiscal fourth quarter, total revenues of $1,208.2 million outpaced the consensus mark of $1,158 million. The top line increased 12.3% on a year-over-year basis. EAT gained from the solid performance of Chili's.
Chili's
In the fiscal fourth quarter, revenues in the Chili’s segment rose 13.7% year over year to $1,084.4 million. The upside was driven by increased menu pricing and higher traffic.
Chili's restaurant expenses (as a percentage of company sales) in the fiscal fourth quarter were 84.9% compared with 87.1% in the prior-year quarter. The downside was caused by sales leverage, marginally overshadowed by an increase in hourly labor, repairs and maintenance, advertising and manager salaries, as well as bonus expenses.
Chili's company-owned traffic rose 5.9% year over year in the quarter under discussion. The metric fell 7.7% in the prior-year quarter.
The segment’s company-owned comps rose 14.8% in the fiscal fourth quarter from the year-ago quarter’s levels.
At Chili’s, domestic comps (including company-owned and franchised) moved up 4.4% year over year against a decline of 6.9% reported in the prior-year period.
Maggiano’s
Maggiano’s sales in the fiscal fourth quarter increased 2% year over year to $123.8 million. Favorable comparable restaurant sales, courtesy of increased menu pricing and favorable menu item mix, drove the upside. Comps in the segment rose 2.5% year over year.
Traffic in the quarter under discussion fell 8.9% year over year. The metric was down 0.2% in the prior-year quarter.
Maggiano's company restaurant expenses (as a percentage of company sales) in the fiscal fourth quarter were 84% compared with 82.7% a year ago. The downside was caused by menu pricing partially offset by increased repairs and maintenance expenses.
Operating Results
In the quarter under review, total operating costs and expenses came in at $1.13 billion compared with $1.01 billion reported in the year-ago quarter. Adjusted restaurant operating margin, as a percentage of company sales, was 15.2% compared with 13.4% reported in the prior-year quarter.
Adjusted EBITDA in the fiscal fourth quarter came in at $141.8 million compared with $114.5 million reported in the prior-year quarter.
Balance Sheet
As of Jun 26, 2024, cash and cash equivalents amounted to $64.6 million compared with $15.1 million as of Jun 28, 2023. As of Jun 26, 2024, long-term debt was $786.3 million compared with $912.2 million as of Jun 28, 2023.
Fiscal 2025 Outlook
In the fiscal 2025, management anticipates total revenues to be in the range of $4.55-$4.62 billion. Capital expenditures are expected in the $195-$215 million band. EAT projects fiscal 2025 EPS in the range of $4.35-$4.75.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted 7.46% due to these changes.
VGM Scores
Currently, Brinker International has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Brinker International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Brinker International belongs to the Zacks Retail - Restaurants industry. Another stock from the same industry, Papa John's (PZZA), has gained 4.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
Papa John's reported revenues of $507.89 million in the last reported quarter, representing a year-over-year change of -1.3%. EPS of $0.61 for the same period compares with $0.59 a year ago.
Papa John's is expected to post earnings of $0.40 per share for the current quarter, representing a year-over-year change of -24.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.4%.
Papa John's has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
