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Brinker's (EAT) Shares Up on Q1 Earnings Beat, Revenues Miss

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Brinker's (EAT) Shares Up on Q1 Earnings Beat, Revenues Miss

Brinker's (EAT) first-quarter fiscal 2019 earnings benefit from higher revenues at Chili's. Lower operating costs also aid earnings.

Brinker International, Inc. EAT reported mixed results for first-quarter fiscal 2019, wherein earnings surpassed estimates while revenues marginally lagged the same.

Adjusted earnings of 47 cents per share surpassed the Zacks Consensus Estimate of 42 cents by 11.9%. The bottom line also grew by the same percentage from the year-ago quarter, driven by higher revenues.

Quarterly revenues were $753.8 million, which lagged the consensus estimate of $753.9 million. The top line, however, increased 1.9% on a year-over-year basis. The company’s traffic-building strategies and efforts to capture greater market share have aided top-line growth.

Following the earnings beat, shares of Brinker have increased 4.4% on Oct 30. Over the past year, the company’s shares have gained 48.1%, outperforming the industry’s rally of 6.2%.

Let’s take a closer look at the fiscal first-quarter numbers.

Brand Performances

Brinker primarily engages in ownership, operation, development and franchising of various restaurant brands under the names Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s).

Chili's

Revenues at Chili’s totaled $640.3 million in the reported quarter, up 2% from the prior-year quarter. The upside was driven by rise in comps.

The brand’s company-owned comps rose 2%, owing to 4% improvement in traffic, partially offset a 2% decline in mix. However, comps compared favorably with increase of 0.6% recorded in the fourth quarter and decline of 3.4% in the year-ago quarter.

Comps at Chili's franchised restaurants decreased 0.2% compared with a 4.1% decline in the year-ago quarter and a 1.4% drop in the fiscal fourth quarter. At international franchised Chili’s restaurants, comps declined 3% compared with the last reported quarter’s decrease of 2.9% and year-ago quarter’s decline of 7.9%. Meanwhile, the same increased in the domestic franchised units by 1.5% compared with the year-ago quarter’s decline of 1.7% and the fiscal fourth quarter’s decline of 0.5%.

At Chili's, domestic comps (including company-owned and franchised) moved up 1.9% compared with the last reported quarter’s increase of 0.4% and the year-earlier quarter’s decline of 3%.

Maggiano's

Maggiano's sales declined 1.5% year over year to $88 million primarily due to a decrease in restaurant capacity.

Comps remained flat in the reported quarter against a decline of 2.6% in the year-ago quarter, courtesy of 2.3% increase in pricing, partially offset by 2.1% decline in traffic.

Brinker International, Inc. Price, Consensus and EPS Surprise

 

Brinker International, Inc. Price, Consensus and EPS Surprise | Brinker International, Inc. Quote

Operating Results

Total operating costs and expenses decreased roughly 0.5% to nearly $706.9 million compared with $710.8 million in the year-ago quarter. While the cost of sales margin contracted 70 basis points (bps), restaurant labor margin remained flat year over year.

Restaurant operating margin, as a percentage of company sales, was 11.1% compared with 12.6% in the prior-year quarter.

Balance Sheet

As of Sep 26, 2018, cash and cash equivalents were $11 million compared with nearly $9 million at the end of first-quarter fiscal 2018.

Long-term debt was $1.2 billion as of Sep 26, 2018, compared with $1.5 billion as of Jun 27, 2018. Total shareholders’ deficit in the reported quarter was $815.9 million compared with $718.3 million as of Jun 2, 2018.

Management approved a quarterly dividend of 38 cents per share of the company’s common stock in the first quarter, which is payable on Dec 27 to shareholders of record as of Dec 7.

Zacks Rank & Peer Releases

Brinker currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McDonald's MCD reported impressive third-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings per share of $2.10 surpassed the consensus mark of $1.98 by 6.1% and increased 19% from the year-ago quarter (22% in constant currencies). The upside reflects stronger operating performance.

Domino's DPZ reported mixed quarterly numbers for third-quarter 2018, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $1.95 per share outpaced the consensus mark of $1.73 and increased 53.5% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.

Restaurant Brands QSR reported lower-than-expected results in third-quarter 2018. Adjusted earnings of 63 cents per share missed the consensus mark by a couple of cents. However, the reported figure increased 8.6% from the year-ago quarter. This uptick can be primarily attributable to consistent improvement in the company’s top line along with the recovery of preferred shares in December 2017.

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