Was Brinker International Inc’s (NYSE:EAT) Earnings Decline A Part Of Broader Industry Downturn?
Understanding how Brinker International Inc (NYSE:EAT) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Brinker International is doing by comparing its latest earnings with its long-term trend as well as the performance of its hospitality industry peers. See our latest analysis for Brinker International
Was EAT’s weak performance lately a part of a long-term decline?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend enables me to examine various companies on a more comparable basis, using the most relevant data points. “For Brinker International, its “, most recent earnings is $137.5M, which compared to the previous year’s figure, has declined by -27.94%. Since these figures are relatively short-term, I’ve created an annualized five-year value for EAT’s earnings, which stands at $165.1M. This doesn’t seem to paint a better picture, as earnings seem to have consistently been declining over the longer term.
Why could this be happening? Well, let’s take a look at what’s occurring with margins and if the entire industry is facing the same headwind. Over the last couple of years, revenue growth has been lagging behind which indicates that Brinker International’s bottom line has been driven by unmaintainable cost-cutting. Viewing growth from a sector-level, the US hospitality industry has been growing its average earnings by double-digit 13.57% over the prior year, and 11.39% over the previous few years. This suggests that whatever uplift the industry is profiting from, Brinker International has not been able to leverage it as much as its industry peers.
What does this mean?
Brinker International’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that experience a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and expansion. You should continue to research Brinker International to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for EAT’s future growth? Take a look at our free research report of analyst consensus for EAT’s outlook.
2. Financial Health: Is EAT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
