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Brinker (EAT) Q2 Earnings and Revenues Surpass Estimates

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Zacks Equity Research
·5 min read
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Brinker International, Inc. EAT reported second-quarter fiscal 2021 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. While the bottom line beat the consensus estimate for the fifth straight quarter, the top line outpaced the same for fourth consecutive quarter. However, both the metrics declined year over year. Despite reporting better-than-expected results, the company’s shares declined 11.7% on Jan 27.

Earnings & Revenue Discussion

The company reported adjusted earnings per share of 35 cents, beating the Zacks Consensus Estimate of 30 cents. Notably, Brinker had reported adjusted earnings of $1.01 in the year-ago quarter.

Quarterly revenues of $760.7 million surpassed the consensus mark of $752. However, the top line declined 12.5% on a year-over-year basis. Notably, the downside was primarily due to the COVID-19 pandemic, which negatively impacted the dining room sales.

Brand Performances

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

Brinker International, Inc. Price, Consensus and EPS Surprise

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

Brinker International, Inc. price-consensus-eps-surprise-chart | Brinker International, Inc. Quote

Chili's

Chili’s revenues in the fiscal second quarter fell 6.3% year over year to $696.4 million, primarily due to lower traffic and dismal dining room sales. However, this was partly offset by increase in off-premise sales, which includes It's Just Wings.

Chili's company restaurant expenses (as a percentage of company sales) in the fiscal second quarter plunged to 88.7% year over year compared with 87.9% in the prior-year quarter. The increase was primarily due to rise in expenses on account of delivery fees and supplies in connection with the growth in off-premise sales, sales deleverage, and unfavorable commodity pricing. The increase was offset by decline in advertising expenses, manager and hourly labor expenses, repairs and maintenance expenses, supervision expenses and credit card fees.

In second-quarter fiscal 2021, company-owned comps declined 6.3% from the prior-year quarter.

Comps at Chili's franchised restaurants declined 9% compared with dip of 0.4% in the year-ago quarter. At international franchised Chili’s restaurants, the same fell 16.2% compared with the year-ago quarter’s decrease of 0.9%. Meanwhile, at the U.S. franchised units, comps declined 4.7% against the year-ago quarter’s growth of 0.2%.

At Chili's, domestic comps (including company-owned and franchised) fell 6.1% against the prior-year quarter’s increase of 1.7%.

Maggiano's

Maggiano's sales slumped 49% year over year to $64.3 million primarily due to lower dining sales on account of COVID-19. However, this was partially mitigated by increased off-premise sales. Comps plunged 47% year over year.

Maggiano's company restaurant expenses (as a percentage of company sales) in the fiscal second quarter soared 94.5% year over year compared with the prior-year quarter’s 83.3%. The increase was primarily led by sales deleverage and high expenses related to delivery fees and supplies, unfavorable menu item mix, adverse commodity pricing and higher insurance expenses. However, these were partially negated by lower advertising, labor, repairs and maintenance expenses, better menu item mix, lower utilities expenses and favorable menu pricing.

Operating Results

Total operating costs and expenses declined to $738.6 million from $825.8 million in the year-ago quarter. Moreover, restaurant operating margin — as a percentage of company sales — was 10.7% compared with 12.7% in the prior-year quarter.

Balance Sheet

As of Dec 23, 2020, cash and cash equivalents amounted to $64.1 million compared with $12 million as on Dec 25, 2019.

Long-term debt was $1,134.6 million as of Dec 23, 2020, compared with $1,208.5 million on Jun 24, 2020. Total shareholders’ deficit in the reported quarter came in at ($444.1) million compared with ($479.1) million as of Jun 24, 2020.

Zacks Rank & Key Picks

Brinker, which shares space with BJ's Restaurants, Inc. BJRI, has a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the same space include Yum! Brands, Inc. YUM and Jack in the Box Inc. JACK. Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Yum! Brands have an impressive long-term earnings growth rate of 12.3%.

Jack in the Box fiscal 2021 earnings are expected to witness growth of 20.4%.

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