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Brinker (EAT) Stock Gains on Q4 Earnings & Revenue Beat

Zacks

Brinker International, Inc. EAT posted better-than-expected results in fourth-quarter fiscal 2017 with both earnings and revenues surpassing the Zacks Consensus Estimate.

Shares of this Texas-based casual-dining restaurant gained nearly 2% in yesterday’s trading session following the release.

Earnings and Revenue Discussion

Adjusted earnings of $1.09 per share surpassed the Zacks Consensus Estimate of $1.05 by nearly 4%. However, earnings decreased 12.1% year over year due to lower revenues and margins.

Quarterly revenues declined 8.1% year over year to $810.6 million due to company sales and franchise and other revenues. Notably, company sales decreased 8.1% to $785.8 million while franchise and other revenues declined 5.7%. However, revenues surpassed the Zacks Consensus Estimate of $801.6 million by 1.1%.

In the reported quarter, comps declined 1.8%, flat with the prior-year quarter figure. The figure compared favorably with the comps decline of 2.2% in the preceding quarter.

Behind the Headline Numbers

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

Chili's

Chili's reported revenues of $682.9 million, down 8.6% year over year.

Chili's company-owned comps fell 2.2% due to a 6.5% decline in traffic, partially offset by a 2.9% and 1.4% improvement in pricing and mix, respectively. Comps compared favorably with the prior-quarter decline of 2.3% but unfavorably with the 1.8% drop in the year-ago quarter.

Comps at its franchised restaurants went down 1.7%, compared with a 3.4% decline in the year-ago quarter and 2.5% drop last quarter.

Comps declined 4.2% in international franchised Chili’s restaurants, narrower than the year-ago quarter’s decrease of 5.5% and the prior quarter’s decline of 7.1%. Meanwhile, the same fell in the domestic franchised units by 0.2%, as against a rise of 0.3% in the last quarter and fall of 2.1% in the year-ago quarter.

Domestic comps (including company-owned and franchised) at Chili's declined 1.7%, same as last quarter. Meanwhile, the figure compared favorably with the prior-year quarter’s decline of 1.8%.

Maggiano's

Maggiano's sales decreased 4.8% year over year to $102.9 million.

Comps rose 0.5% in the quarter due to a 1% and 1.6% improvement in pricing and mix, respectively, partially offset by a 2.1% decline in traffic. Comps compared favorably with the prior-quarter decline of 1.6% and the year-ago comparable period fall of 1.7%.

Expenses and Margins

Total operating costs and expenses decreased 6.6% to $730.4 million from $782.3 million in the year-ago period.

Cost of sales margin improved nearly 40 basis points (bps), while restaurant labor margin was almost flat.

Restaurant operating margin, as a percentage of company sales, declined 130 bps.

Fiscal 2017 Results

Brinker’s fiscal 2017 adjusted earnings of $3.20 topped the Zacks Consensus Estimate of $3.14 by nearly 2%. However, it decreased 9.9% from the year-ago quarter figure of $3.55 owing to lower revenues.

In the fiscal, total revenues of $3.15 billion met the Zacks Consensus Estimate but declined 3.3% year over year.

Brinker International, Inc. Price, Consensus and EPS Surprise

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


Fiscal 2018 Guidance

For fiscal 2018, Brinker expects earnings per share in the range of $3.25 to $3.35. Notably, the Zacks Consensus Estimate for fiscal 2018 earnings is pegged at $3.12.

Revenues are expected to be up roughly 0.5–1.5%.

Moreover, the company anticipates comps growth to be flat to up 1% for the full year. Restaurant operating margin is estimated to be down 25–40 bps year over year.

Zacks Rank & Peer Stocks

Brinker currently has a Zacks Rank #4 (Sell).

Restaurant Brands International, Inc.’s QSR second-quarter 2017 adjusted earnings of 51 cents per share outpaced the Zacks Consensus Estimate of 45 cents by 13.3%. The figure also improved from the prior-year quarter’s 41 cents on revenue growth.

Darden Restaurants, Inc.’s DRI fourth-quarter fiscal 2017 adjusted earnings of $1.18 per share surpassed the Zacks Consensus Estimate of $1.15 by 2.6%. Further, the bottom line rose 7.3% year over year on the back of higher revenues and lower share count.

Chipotle Mexican Grill, Inc.’s CMG second-quarter 2017 adjusted earnings of $2.32 per share outpaced the Zacks Consensus Estimate of $2.16 by 7.4%. The figure also improved significantly from the prior-year quarter’s 87 cents on a substantial rise in revenues.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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