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Brinker’s (EAT) Q4 Earnings Beat, Revenues Miss Estimates

Zacks

Brinker International, Inc. EAT reported mixed fourth-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. With this, the bottom line outpaced the consensus mark for the second straight quarter, while the top line fell short of the same after registering a beat in the preceding two quarters. Following the quarterly results, shares of the company declined 3.1% yesterday.

Adjusted earnings came in at $1.36, which surpassed the Zacks Consensus Estimate of $1.35 and improved 14.3% from the year-ago quarter. Quarterly revenues totaled $834.1 million, which missed the consensus mark of $836 million but improved 2.1% on a year-over-year basis. The company’s traffic-building strategies and efforts to capture increased market share have aided the top line.

Brand Performances

Brinker primarily engages in 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

Revenues at Chili’s totaled $701.9 million in the reported quarter, up 2% from the prior-year quarter. The upside was driven by comps growth and rise in To Go sales.

The brand’s company-owned comps rose 1.5% on account of a 3.9% increase in pricing, partially offset by a decline of 1% in mix and a 0.5% decrease in traffic. In third-quarter fiscal 2019, company-owned comps rose 3%.

Comps at Chili's franchised restaurants inched up 0.4% against a decline of 1.4% registered in the year-ago quarter and a drop of 0.2% in the third quarter. At international franchised Chili’s restaurants, the same fell 0.5% compared with the third quarter's decrease of 3.9% and the year-ago quarter’s decline of 2.9%. Meanwhile, at the U.S. franchised units, comps increased by 0.9% against the year-ago quarter’s decline of 0.6%. However, in third-quarter fiscal 2019, the metric rose 2% year over year.

At Chili's, domestic comps (including company-owned and franchised) grew 1.3% compared with the last quarter’s increase of 2.7%. Moreover, the figure inched up 0.3% in the prior-year quarter.

Maggiano's

Maggiano's sales decreased 0.3% year over year to $102.9 million primarily due to decline in comparable restaurant sales.

Comps dropped 0.2% on a 1.3% decline in traffic. Comps had increased 0.4% in the prior-year quarter.

Operating Results

Total operating costs and expenses jumped roughly 3.1% to nearly $770.1 million compared with $746.7 million in the year-ago quarter. Restaurant operating margin, as a percentage of company sales, was 14.9% compared with 15.9% in the prior-year quarter.

Balance Sheet

As of Jun 26, 2019, cash and cash equivalents amounted to $13.4 million compared with nearly $10.9 million at the end of Jun 27, 2018.

Long-term debt was $1.2 billion as of Jun 26, 2019, compared with $1.5 billion as of Jun 27, 2018. Total shareholders’ deficit in the reported quarter was $778.2 million compared with $718.3 million as of Jun 27, 2018.

Management approved a quarterly dividend of 38 cents per share of the company’s common stock in the fiscal fourth quarter, which is payable Sep 26 to its shareholders of record as on Sep 6.

2020 Guidance

Brinker expects to acquire 116 Chili's restaurants in the first quarter of fiscal 2020 from its franchisee — ERJ Dining. The impact of this acquisition has been included in fiscal 2020 guidance. For the fiscal year, Brinker expects revenues to increase in the range of nearly 9-10%. Comps are anticipated to increase within the 1.75-2.5% band. However, restaurant operating margin is expected to contract 20 bps year over year.

Zacks Rank & Peer Releases

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

Darden DRI reported fourth-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Adjusted earnings of $1.76 per share beat the Zacks Consensus Estimate of $1.73. The bottom line also increased 26.6% year over year on higher revenues.

Domino’s DPZ reported mixed second-quarter 2019 financial numbers, wherein earnings exceeded the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $2.19 per share outpaced the Zacks Consensus Estimate of $2.00. The metric also increased 19% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.

Chipotle CMG reported better-than-expected results in the second quarter of 2019. Its adjusted earnings of $3.99 per share surpassed the Zacks Consensus Estimate of $3.69 by 8.1%. The bottom line also grew 39% from the year-ago quarter backed by solid revenues and strong operating margins.

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