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Brinker (EAT) Stock Gains Despite Q1 Earnings & Sales Miss

Brinker International, Inc. EAT posted lower-than-expected results in first-quarter fiscal 2018 with both earnings and revenues lagging the Zacks Consensus Estimate.

However, shares of this Texas-based casual-dining restaurant gained more than 7% in yesterday’s trading session following the release. This is because investors gained confidence in Chili’s new menu and operational focus on speed that are likely to drive traffic.

Earnings and Revenues Discussion

Adjusted earnings of 42 cents per share missed the Zacks Consensus Estimate of 43 cents by nearly 2.3%. The bottom line also decreased 14.3% year over year due to lower revenues and margins. Notably, Hurricanes Harvey and Irma had a negative impact of about 3 cents per share on the company’s earnings.

Quarterly revenues declined 2.5% year over year to $739.4 million due to lower company sales, partially offset by franchise and other revenues. While, the company’s sales decreased 2.8% to $716.9 million, franchise and other revenues improved 6.5%. Weather events had an adverse impact on the company’s sales to the tune of $5.4 million.

Consequently, revenues lagged the Zacks Consensus Estimate of $756 million by 2.3%.

Comps decreased 3.3% in the reported quarter, comparing unfavorably with the prior-year quarter's decline of 1.3% and preceding quarter’s drop of 1.8%.

Brinker International, Inc. Price, Consensus and EPS Surprise

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 reported revenues of $627.6 million, down 3.2% year over year, due to a decline in comparable restaurant sales including the impact of temporary restaurant closures associated with the hurricanes.

Also, its company-owned comps fell 3.4% due to a 8.7% decline in traffic, partially offset by a 2.8% and 2.5% improvement in pricing and mix, respectively. Comps compared unfavorably with the prior-quarter decline of 2.2% and 1.4% drop in the year-ago quarter.

Comps at its franchised restaurants went down 4.1% compared with a 0.6% decline in the year-ago quarter and 1.7% drop in the last quarter.

In international franchised Chili’s restaurants, comps declined 7.9% comparing unfavorably with the year-ago quarter’s growth of 0.9% and the prior-quarter’s decline of 4.2%. Meanwhile, the same fell in the domestic franchised units by 1.7% compared with a drop of 0.2% in the last quarter and 1.6% decline in the year-ago quarter.

At Chili's domestic comps (including company-owned and franchised) declined 3%, wider than the prior-quarter’s drop of 1.7% and the prior-year quarter’s decline of 1.3%.


Maggiano's sales inched up 0.6% year over year to $89.3 million, primarily owing to an increase in restaurant capacity. This, in turn, was partially offset by a decrease in comps including the impact of temporary restaurant closures associated with the hurricanes.

Comps declined 2.6% in the quarter due to a 2.8% decrease in traffic, partially offset by a 0.1% improvement in both pricing and mix. Markedly, comps compared unfavorably with the prior-quarter’s rise of 0.5% and the year-ago quarter’s fall of 0.6%.

Expenses and Margins

Total operating costs and expenses decreased 0.8% to $710.8 million from $717 million in the year-ago period.

While cost of sales margin improved nearly 10 basis points (bps), restaurant labor margin increased about 100 bps.

Restaurant operating margin, as a percentage of company sales, declined 70 bps.

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.

McDonald's Corp. MCD reported third-quarter adjusted earnings per share of $1.76 beating the Zacks Consensus Estimate of $1.75 by 0.6%. Earnings also increased 8.6% year over year.

Buffalo Wild Wings, Inc.’s BWLD third-quarter 2017 adjusted earnings were $1.36 per share, which outpaced the Zacks Consensus Estimate of 78 cents by 74.4%. Also, the bottom line compared favorably with the year-ago quarter figure of $1.23 per share by 10.6%.

In third-quarter 2017, Domino’s Pizza, Inc. DPZ posted earnings of $1.27 per share that outpaced the Zacks Consensus Estimate of $1.22 by 4.1%. Further, earnings climbed 32.3% year over year.

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