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Brinker (EAT) Q3 Earnings Miss Estimates, Revenues Surpass

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Brinker International, Inc. EAT reported mixed third-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. The top and the bottom line increased on a year-over-year basis.

Following the announcement, shares of the company declined 12.2% during trading hours on May 4. Negative investor sentiments were witnessed as the company cited concerns related to staffing challenges and labor and commodity inflationary hurdles.

Earnings & Revenue Discussion

In the quarter under review, adjusted earnings per share (EPS) came in at 92 cents missing the Zacks Consensus Estimate of 99 cents. In the prior-year quarter, the company had reported an adjusted EPS of 78 cents.

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

During the fiscal third quarter, total revenues of $980.4 million beat the Zacks Consensus Estimate of $976 million by 0.4%. The top line surged 18.3% on a year-over-year basis. The company gained from the solid performance of Chili's and Maggiano's.

Chili's

Chili’s revenues in the fiscal third quarter increased 15.3% year over year to $879.6 million. The upside was primarily driven by an increase in dining room sales backed by higher traffic, price increases and a favorable mix. Moreover, the acquisition of 66 restaurants in fiscal 2022 (previously owned by franchisees) added to the positives.

Chili's company restaurant expenses (as a percentage of company sales) in the fiscal third quarter increased to 87.5% year over year from 85.7% reported in the prior-year quarter. The upside can be attributed to a rise in restaurant labor costs, which includes wage rates, training and overtime. Higher expenses related to commodities, utilities as well as repairs and maintenance pushed the costs higher. However, this was partially offset by sales leverage and favorable menu pricing. Chili's company-owned traffic in the quarter increased 2.1% year over year compared with the 4% growth reported in the prior-year quarter.

The segment’s company-owned comps increased 10.3% in the fiscal third quarter from the year-ago quarter’s levels.

At Chili's, domestic comps (including company-owned and franchised) rose 9.9% year over year compared with a 0.6% rise reported in the prior-year quarter.

Maggiano's

Maggiano's sales soared 54.1% year over year to $100.8 million, primarily due to an increase in dining and banquet room sales. Comps increased 50.5% year over year. Traffic in the quarter rose 28.9% year over year, against a decline of 21.6% reported in the prior-year quarter.

Maggiano's company restaurant expenses (as a percentage of company sales) in the fiscal third quarter were 89.9% compared with 91.2% reported in the prior-year quarter. The downside was primarily due to sales leverage and increased menu pricing. This was negated by increased restaurant labor costs, commodity pricing and other operational expenses.

Operating Results

Total operating costs and expenses in the fiscal third quarter came in at $931 million compared with $776.2 million reported in the year-ago quarter. Restaurant operating margin — as a percentage of company sales — was 12.2% compared with 13.9% reported in the prior-year quarter.

Balance Sheet

As of Mar 30, 2022, cash and cash equivalents amounted to $12.9 million compared with $63.6 million as of Mar 24, 2021.

Long-term debt as of Mar 30, 2022, came in at $987.9 million compared with $1,047.3 million as of Dec 29, 2021. Total shareholders’ deficit in the reported quarter came in at ($311.2) million compared with ($327.4) million reported in the previous quarter.

Fiscal 2022 Outlook

For fiscal 2022, The company anticipates total revenues in the range of $3.75-$3.85 billion. Capital expenditures are expected in the range of $160-$165 million. The company expects fiscal 2022 diluted EPS in the range of $3.05-$3.30.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the same space are BBQ Holdings, Inc. BBQ, Dave & Buster's Entertainment, Inc. PLAY and Arcos Dorados Holdings Inc. ARCO.

BBQ Holdings sports a Zacks Rank #1. BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have increased 16.5% in the past year.

The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and EPS suggests growth of 40.9% and 66.2%, respectively, from the year-ago period’s levels.

Dave & Buster's sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 212%, on average. Shares of the company have increased 7.9% in the past year.

The Zacks Consensus Estimate for Dave & Buster's current-year sales and EPS suggests growth of 27.2% and 51.1%, respectively, from the year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2 (Buy). Arcos Dorados has a long-term earnings growth of 31.3%. Shares of the company have risen 25.2% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 16.6% and 66.7%, respectively, from the year-ago period’s levels.


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