Earnings Preview: Brinker - Analyst Blog
January 20 2012 - 7:45AM
Zacks
Dallas-based Brinker
International Inc. (EAT) is slated to
release its second quarter 2012 results on Tuesday, January 24,
before the market opens. The current Zacks Consensus Estimate for
the second quarter is pegged at 45 cents per share, representing an
annualized growth of 18.27%. The Zacks Consensus Sales estimate is
$686.0 million.
With respect to earnings surprises
over the trailing four quarters, Brinker has outperformed the Zacks
Consensus Estimate in all the quarters. The average earnings
surprise stands at positive 9.11%, implying that the company has
outdone the Zacks Consensus Estimate by the same magnitude over the
same period.
Previous Quarter
Recap
The owner of Chili’s Grill &
Bar and Maggiano's Little Italy restaurant posted first quarter
2012 adjusted earnings per share of 30 cents, surpassing the Zacks
Consensus Estimate of 27 cents and the prior- year quarter earnings
of 21 cents. The upside in earnings was attributable to higher
restaurant margin as well as lower share count.
During the quarter, total revenue
climbed 2.1% year over year to $668.4 million attributed to a 2.0%
upside in system-wide comparable restaurants sales. Restaurant
operating margin expanded 80 basis points (bps) year over year to
15.8%.
Outlook
The casual dining restaurant
company reaffirmed its adjusted earnings guidance range of $1.80 to
$1.95 for fiscal 2012. The company continues to expect full-year
revenues and comparable-restaurant sales to increase 2%–3% year
over year.
Agreement of Estimate
Revisions
In the last 30 days, out of the 17
analysts covering the stock, none of the analysts slashed the
estimates but 2 analysts raised the same for the second quarter.
Likewise, for the third quarter, 2 out of 16 analysts increased
their estimates but none moved in the opposite direction.
Similarly, for fiscal 2012 and 2013, 2 analysts have made upward
revisions while not a single analyst moved in the opposite
direction. This implies that the analysts are slightly positive
regarding the performance of the company.
In the last 7 days, none of the
analysts have budged their estimates, implying that the analysts do
not see any near-term catalysts and thus are maintaining their view
on the stock.
The upward revision in the
analysts’ estimates was based on improved comps at both Chili’s and
Maggiano’s, operating margin expansion, unit growth and benefit
from share repurchases.
Magnitude of Estimate
Revisions
Over the last 60 days, there has
been no change in the earnings estimate of 45 cents for the second
quarter of 2012 and 55 cents for the third quarter of 2012.
Therefore, the analysts expect the company to report in line. In
the last 30 days, estimates for 2012 and 2013 have jumped by a
penny to $1.85 and $2.15, respectively.
The current Zacks Consensus
Estimate for the third quarter, fiscal 2012 and 2013 reflect a
year-over-year growth of 16.76%, 21.82% and 15.91%, respectively.
The Zacks Consensus Sales Estimates for the third quarter, fiscal
2012 and 2013 are $727 million, $2.81 billion and $2.88 billion
respectively.
Earning
Surprises
The current Zacks Consensus
Estimates for the ongoing quarter reflects a 4.44% upside potential
while the third quarter of 2012 reflects a 1.82% downside risk
(essentially a proxy for future earning surprises). Similarly,
fiscal 2011 contain a 0.00% growth potential. However, 2012 has a
downside potential of 0.93%.
Our Take
We believe that Brinker remains one
of the strongest long-term players in the casual dining segment and
besides repositioning its Chili’s brand, the company is also
undertaking several sales initiatives to sustain its positive sales
momentum and record more sustainable and stable growth.The
company’s strategy to shift to franchised operation, focus on
international expansion in order to move away from the
over-supplied domestic market and remain in a cost-control mode for
quite some time, also looks promising for its business. The company
remains on track to double its EPS and achieve margin expansion of
400 bps by 2015.
On the flip side, food cost
inflation, lower consumer spending due to uncertain economic
environment and stiff competition with respect to price, service,
location and concept in order to drive traffic may adversely affect
Brinker’s top and bottom-line growth.
Hence, the company holds a Zacks #2
Rank, which implies a short-term Buy rating. We also reiterate our
long-term Neutral recommendation.
One of the competitors of
Brinker’s, McDonald’s Corporation (MCD), is slated
to release its fourth quarter results on January 24, 2011, before
the opening bell, while another rival, Yum! Brands
Inc. (YUM) will announce fourth quarter results on
February 1, after the market closes.
BRINKER INTL (EAT): Free Stock Analysis Report
MCDONALDS CORP (MCD): Free Stock Analysis Report
YUM! BRANDS INC (YUM): Free Stock Analysis Report
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