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Factors Setting the Tone for Brinker's (EAT) Q2 Earnings

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Zacks Equity Research
·4 min read
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Brinker International, Inc. EAT is scheduled to report second-quarter fiscal 2021 results on Jan 27. In the last reported quarter, the company delivered earnings surprise of 255.6%. Further, it has a trailing four-quarter earnings surprise of 116.6%, on average.

How Are Estimates Placed?

The Zacks Consensus Estimate for fiscal second-quarter earnings is pegged at 36 cents per share, indicating a decline from earnings of $1.01 recorded in the year-ago quarter. For quarterly revenues, the consensus mark is pegged at $770.1 million, suggesting a fall of 9.1% from the year-ago quarter’s figure.

Let's take a look at how things have shaped up in the quarter.

Brinker International, Inc. Price and EPS Surprise

 

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

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

 

Factors at Play

The coronavirus pandemic is expected to have materially affected Brinker’s performance in the fiscal second quarter. In a recent operational update, the company announced that comps at Chili's Grill & Bar and Maggiano's Little Italy restaurants were negatively impacted by dining room closures and capacity limitations due to rise in COVID-19 cases.

Notably, comps at Chili's for the week ended Oct 28, Nov 4, Nov 11, Nov 18, Nov 25, Dec 2 and Dec 9, 2020 declined 1%, 3.9%, 5.7%, 6.5%, 13.3%, 13.8% and 12.3% compared with the prior-year week’s figures, respectively. Meanwhile, comps at Maggiano's for the week ended Oct 28, Nov 4, Nov 11, Nov 18, Nov 25, Dec 2 and Dec 9, 2020 plunged 34%, 44.1%, 42.4%, 44.5%, 39.4%, 53.8% and 63.9%, respectively. Moreover, comps at company-owned stores were down 4.9%, 8.9%, 10.3%, 11.4%, 16.4%, 21.1% and 21.7%, for the week ended Oct 28, Nov 4, Nov 11, Nov 18, Nov 25, Dec 2 and Dec 9, 2020, respectively. The metrics are likely to get reflected in the fiscal second-quarter top line.

Although the company is witnessing a gradual improvement in dining occupancy, it is still lower than the pre-pandemic era. This along with costs related to various sales-boosting initiatives, advertising expenses along with commodity inflation are expected to have affected margins in the to-be-reported quarter.

However, continuous focus on menu innovation, digital enhancement, advertisement campaigns and introduction of better service platforms are likely to have boosted the top line in the fiscal second quarter.

What Our Model Says

Our proven model predicts an earnings beat for Brinker this time around. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates.

Earnings ESP: Brinker has an Earnings ESP of +30.25%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Poised to Beat Estimates

Here are some other stocks from the Zacks Retail-Wholesale sector that investors may consider as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming releases:

Darden Restaurants, Inc. DRI currently carries a Zacks Rank #3 and has an Earnings ESP of +6.79%.

McDonald's Corporation MCD carries a Zacks Rank #3 and has an Earnings ESP of +1.06%.

Papa John's International, Inc. PZZA carries a Zacks Rank #3 and has an Earnings ESP of +1.48%.

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McDonalds Corporation (MCD) : Free Stock Analysis Report
 
Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
 
Brinker International, Inc. (EAT) : Free Stock Analysis Report
 
Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report
 
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