Texas Roadhouse Beats by a Penny - Analyst Blog
February 27 2012 - 3:00AM
Zacks
Texas Roadhouse
Inc. (TXRH) recently posted fourth quarter 2011 earnings
of 17 cents, which exceeded the Zacks Consensus Estimate of 16
cents and grew 28% year over year. The higher-than-expected results
were attributable to lower-than-anticipated workers compensation
expense and income tax rate. In full-fiscal 2011, earnings per
share grew 11% year over year to 88 cents.
Total revenue climbed 13.0% from
the prior-year quarter to $276.6 million. The upside was
attributable to higher comparable sales growth. Company-owned
restaurant sales increased 13.1% to $274.2 million, whereas
franchise royalties and fees upped 7.0% to $3.8 million.
Comparable-restaurant sales grew 5.6% at company-owned restaurants
and 5.7% at franchised restaurants.
During the quarter, restaurant
operating margin slid 25 basis points (bps) to 16.8% on a 90-bp
rise in cost of sales and an 18-bp increment in labor cost,
partially offset by decreases of 76 bps in other operating costs
and 7 bps in rent.
In full-fiscal 2011, revenue grew
10% year over year to $1,109.2 million.
Store Update
During the quarter, Texas Roadhouse
opened 10 company-owned restaurants and no franchise restaurant.
The company did not close any unit. It remains on track to ramp up
its development pipeline in 2012.
Management’s 2012 goal includes 25
unit openings, reflecting a 25% growth from the unit base in 2011.
At the end of the quarter, there were 294 company-owned and 72
franchised restaurants.
Financial
Position
Texas Roadhouse ended the quarter
with cash and cash equivalents of $73.7 million and total long-term
debt of $61.6 million.
The company authorized a new stock
repurchase program under which it can buy back up to $100 million
of common stock. The company called off the previous stock
repurchase program, which had no expiration date.
Moreover, the company’s board
authorized an increase of 12.5% in quarterly dividend payment,
bringing it to 9 cents per share versus 8 cents paid last year.
Outlook
Management projected earnings
growth of 5% in 2012. The company expects food cost inflation of 8%
in fiscal 2012. Texas Roadhouse provided its comparable-store sales
growth outlook of 4–5%. Capital expenditure is expected to be in
the range $80-$85 million for fiscal 2012.
Our Take
Louisville, Kentucky-based Texas
Roadhouse’s top-line momentum is in place, as is evident from the
continuous rise in comparable sales. Its comparable restaurant
sales for the first seven weeks of fiscal 2012 already increased
about 6.7% compared to the prior-year period. This optimistic trend
calls for a sound first quarter.
The company, which offers specially
seasoned steaks, also took a modest price increase of around 2.2%
in late January. The increment was followed by another increase in
the third quarter of fiscal 2011. The positive part is that guest
count remains unscathed despite the menu price hike. Financially,
the company is in a good position. Share buyback and dividend hike
are other positives.
Coming to the downside, like many
of its restaurant peers, the company is also reeling under rising
input cost pressure. For 2012, the food cost environment is
expected to be more expensive compared to 2011, primarily due to
higher beef costs. For 2012, the company will have to grapple with
higher labor costs due to an increase in minimum and tip wages in 6
states and a rise in the income tax rate given the scheduled
expiration of certain federal tax credits at the end of 2011.
Texas Roadhouse which competes with
BJ’s Restaurants Inc. (BJRI) currently retains a
Zacks # Rank, which translates into a short-term ‘Strong Buy’
rating. We are also maintaining our long-term “Outperform”
recommendation on the stock.
BJ'S RESTAURANT (BJRI): Free Stock Analysis Report
TEXAS ROADHOUSE (TXRH): Free Stock Analysis Report
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