Brinker (EAT) Stock Surges on Q4 Earnings & Revenue Beat
Brinker International, Inc. EAT reported fourth-quarter fiscal 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Following the results, the company’s shares surged 14.5% on Aug 12.
Following the release, CEO and President, Wyman Roberts stated, "Leaning into these existing strategies with a clear focus and continually prioritizing the safety of our Team Members and Guests has allowed us to accelerate our performance and deliver industry leading results."
Earnings & Revenue Discussion
The company reported adjusted loss per share of 88 cents, narrower than the Zacks Consensus Estimate of a loss of $1.47. In the year-ago quarter, the company had reported adjusted earnings of $1.36.
Brinker International, Inc. Price, Consensus and EPS Surprise
Brinker International, Inc. price-consensus-eps-surprise-chart | Brinker International, Inc. Quote
Quarterly revenues of $563.2 million beat the consensus mark of $558 million by 0.9%. However, the top line declined 32.5% on a year-over-year basis. Notably, the downside can be primarily attributed to the COVID-19 pandemic, partially offset by the acquisition of 116 Chili's restaurants in the first quarter of fiscal 2020 along with an increase in off-premise 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).
Chili's
Chili’s revenues in the fiscal fourth quarter fell 27.1% year over year to $528.6 million, primarily attributed to lower traffic, temporary dining room closures and capacity limitations owing to the global pandemic. However, this was partially offset by the acquisition of 116 Chili's restaurants (during the first quarter fiscal 2020) and increased off-premise sales.
Chili's company restaurant expenses (as a percentage of company sales) in the fiscal fourth quarter rose 92% year over year compared with 84.8% in the prior-year quarter. The increase was primarily driven by sales deleverage owing to COVID-19 along with high expenses related to delivery fees and supplies, and unfavorable commodity pricing. However, these were partially offset by lower advertising, labor, repairs and maintenance expenses, and favorable menu item mix.
In fourth-quarter fiscal 2020, company-owned comps declined 32.2% from the prior-year quarter.
Comps at Chili's franchised restaurants declined 49.5% against 0.4% growth in the year-ago quarter. At international franchised Chili’s restaurants, the same fell 66.1% compared with the year-ago quarter’s 0.5% decline. Meanwhile, at the U.S. franchised units, comps declined 39.9% against 0.9% growth in the year-ago quarter.
At Chili's, domestic comps (including company-owned and franchised) fell 33% compared with 1.3% growth in the prior-year quarter.
As of Jul 29, 2020, 885 Chili's restaurants with dining rooms (or patios) were open. The segment's comparable restaurant sales declined 10.9% quarter to date (as of Jul 29, 2020).
Maggiano's
Maggiano's sales fell 68.2% year over year to $34.6 million primarily due to lower dining and banquet room traffic because of COVID-19 along with temporary dining and banquet room closures and limited capacity of reopened locations. However, this was partially offset by increased off-premise sales. Comps dropped 66.7% year over year.
Maggiano's company restaurant expenses (as a percentage of company sales) in the fiscal fourth quarter rose 115.5% year over year compared with 87.1% in the prior-year quarter. The increase was primarily led by sales deleverage owing to COVID-19 along with high expenses related to delivery fees and supplies, and unfavorable commodity pricing. However, these were partially offset by lower advertising, labor, repairs and maintenance expenses, better menu item mix, lower utilities expenses and favorable menu pricing.
As of Jul 29, 2020, 52 Maggiano's restaurants with dining rooms (or patios) were open. The segment's comparable restaurant sales declined 44.6% quarter to date (as of Jul 29, 2020).
Operating Results
Total operating costs and expenses declined 20% to $616.4 million from $770.1 million in the year-ago quarter. However, restaurant operating margin — as a percentage of company sales — was 6.4% compared with 14.9% in the prior-year quarter.
Balance Sheet
As of Jun 24, 2020, cash and cash equivalents amounted to $43.9 million compared with $13.4 million as on Jun 26, 2019.
Long-term debt was $1,208.5 million as of Jun 24, 2020, compared with $1,206.6 million on Jun 26, 2019. Total shareholders’ deficit in the reported quarter came in at ($479.1) million compared with ($778.2) million as of Jun 26, 2019.
As of Jun 24, 2020, the company made dividend payments worth $57.4 million, compared with $60.3 million as on Jun 26, 2019.
Fiscal 2020 Highlights
Adjusted earnings for fiscal 2020 were $1.71 compared with $3.93 reported in 2019.
Total revenues for fiscal 2020 were reported at $3,078.5, compared with $3,217.9 in 2019.
For 2020, operating income (as a percentage of total revenues) came in at 2% compared with 7.2% reported in 2019.
Other Business Updates
On Jun 23, 2020, the company in partnership with Doordash launched a new virtual brand – It’s Just Wings. Notably, 1,050 of its company-owned restaurants were launched nationally.
Fiscal First Quarter 2021 Outlook
For first-quarter fiscal 2021, adjusted net loss per share is expected in the range of 40 cents to 25 cents. The Zacks Consensus Estimate for the same is currently pegged at a loss of $1.47 per share. Operating cash flow is expected to be positive, while comparable restaurant sales are expected to decline low to mid-teens.
Zacks Rank & Key Picks
Currently, Brinker carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the same space include Jack in the Box Inc. JACK, Papa John's International, Inc. PZZA and El Pollo Loco Holdings, Inc. LOCO, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Jack in the Box has a three-five year earnings per share growth rate of 10.6%.
Papa John's earnings in 2021 are expected to surge 64.8%.
El Pollo Loco has a trailing four-quarter earnings surprise of 94.1%, on average.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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
Jack In The Box Inc. (JACK) : Free Stock Analysis Report
Brinker International, Inc. (EAT) : Free Stock Analysis Report
Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report
El Pollo Loco Holdings, Inc. (LOCO) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
