Brinker (EAT) Q2 Earnings Beat Estimates, Revenues Lag
Brinker International, Inc. EAT reported second-quarter fiscal 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line increased on a year-over-year basis. During the quarter, the company registered benefits from effective marketing and pricing strategies. It also reported sequential improvements in guest traffic, surpassing industry benchmarks.
Following the results, the company’s shares moved up 5.2% during trading hours on Jan 31.
Earnings & Revenue Discussion
In the quarter under review, Brinker reported adjusted earnings per share (EPS) of 99 cents, surpassing the Zacks Consensus Estimate of a loss of $1.47. The company reported an adjusted EPS of 76 cents per share in the prior-year quarter.
Brinker International, Inc. Price, Consensus and EPS Surprise
Brinker International, Inc. price-consensus-eps-surprise-chart | Brinker International, Inc. Quote
In the fiscal second quarter, total revenues of $1.07 billion missed the Zacks Consensus Estimate of $1.08 billion. The top line increased 5.4% on a year-over-year basis. EAT gained from the solid performance of Chili's.
Chili's
During the fiscal second quarter, revenues in the Chili’s segment rose 5.5% year over year to $927.2 million. The upside was primarily driven by increased menu pricing. However, this was partially offset by lower traffic and an unfavorable menu item mix. Our model predicted segmental revenues at $919.7 million.
Chili's restaurant expenses (as a percentage of company sales) in the fiscal second quarter were 88.4% compared with 89.7% in the prior-year quarter. The downside was caused by sales leverage, menu pricing, favorable commodity mix, lower delivery and to-go supplies. A rise in advertising and hourly labor expenses partially offset this.
Chili's company-owned traffic declined 0.6% year over year in the quarter. The metric fell 7.6% in the prior-year quarter.
The segment’s company-owned comps jumped 5% in the fiscal second quarter from the year-ago levels.
At Chili’s, domestic comps (including company-owned and franchised) rose 5.1% year over year compared with 7.5% in the prior year.
Maggiano’s
Maggiano’s sales in the fiscal second quarter increased 4.7% year over year to $146.9 million. The upside was primarily driven by favorable comparable restaurant sales, courtesy of increased menu pricing and favorable menu item mix. Comps in the segment rose 6.7% year over year. Our projection was 8.3%.
Traffic in the quarter fell 4.2% year over year. The metric was up 8.4% in the prior-year quarter.
Maggiano's company restaurant expenses (as a percentage of company sales) in the fiscal second quarter were 77.1% compared with 80.1% a year ago. Menu pricing, sales leverage and favorable commodity costs resulted in this downside.
Operating Results
During the quarter, total operating costs and expenses came in at $1.01 billion compared with $0.9 billion reported in the year-ago quarter. Adjusted operating margin, as a percentage of company sales, was 13.1% compared with 11.6% reported in the prior-year quarter.
Balance Sheet
As of Dec 27, 2023, cash and cash equivalents amounted to $22.7 million compared with $14.7 million as of Dec 28, 2022.
As of Dec 27, 2023, long-term debt was $882.4 million compared with $912.2 million as of Jun 28, 2023. Total shareholders’ deficit in the reported quarter was ($109.5) million compared with ($156.3) million in the previous quarter.
Fiscal 2024 Outlook
In fiscal 2024, management anticipates total revenues to be in the range of $4.3-$4.35 billion. Capital expenditures are expected in the $175-$195 million band. EAT projects fiscal 2024 EPS in the range of $3.45-$3.7, up from the prior estimate of $3.35-$3.65.
Zacks Rank & Key Picks
Brinker carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail – Restaurants industry include:
Carrols Restaurant Group, Inc. TAST sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 102% on average. Shares of TAST have rallied 333.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TAST’s 2024 sales and EPS indicates 3.8% and 14.3% growth, respectively, from the year-ago period’s levels.
Darden Restaurants, Inc. DRI carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 4.2%, on average. Shares of DRI have increased 10.6% in the past year.
The Zacks Consensus Estimate for DRI’s 2024 sales and EPS indicates 9.9% and 10.9% growth, respectively, from the year-ago period’s levels.
Chipotle Mexican Grill, Inc. CMG carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 5.8%, on average. The stock has gained 45.8% in the past year.
The Zacks Consensus Estimate for CMG’s 2024 sales and EPS suggests rises of 13.2% and 19.7%, respectively, from the year-ago period’s levels.
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