Brinker International, Inc. EAT has delivered a blistering performance in 2024, leaving the broader market in the dust. The stock has skyrocketed 210.9% year to date, outpacing the industry’s modest 3.1% growth and the S&P 500’s impressive 25.2% climb.
On Friday, the stock closed at $134.26, only 1.4% below its 52-week high but 260.4% above its 52-week low.
Price Performance
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Technical indicators imply EAT's continued strong performance. The stock is trading above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in EAT's financial health and prospects.
50-Day Moving Average
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Decoding Potential Tailwinds Behind EAT’s Rally
The company has been benefiting from the focus on Chili’s "core four" offerings — burgers, crispers, fajitas and margaritas. Successful campaigns like the "Big Smasher" and the value-driven "3 for Me" bundle continue to drive traffic. These initiatives, alongside tiered pricing, have attracted value-conscious and higher-spending customers, contributing to robust profitability.
On its first-quarter fiscal 2025earnings call the company highlighted that its competitors were offering heavily discounted margaritas. However, the real success story lies in balancing value with quality. It emphasized that providing value does not solely rely on having the lowest price. Instead, the price-quality equation is essential for guests.
Brinker's barbell strategy effectively addresses diverse guest needs by balancing great value with profitability. The company will maintain its barbell pricing strategy to protect its industry-leading value for cost-conscious customers while offering premium options for those seeking an elevated experience. EAT will focus on menu management to keep the mix flat or slightly negative in the current economic environment. Brinker aims to enhance the guest experience and deliver traffic significantly above industry averages.
The company is focused on driving traffic through its five-to-drive strategy, which aims to foster innovation and boost sales growth. The 3 for Me campaign, which offers better value than fast food, is currently the primary traffic driver. It attracts guests from various demographics who seek high-quality and great experiences. Guests who take advantage of this offer tend to return more frequently than those who do not.
Brinker is one of the few fast-casual restaurant chains that have been expanding. Management is also gearing up for international expansion, especially in the faster-growing emerging markets. The company is looking to expand the brand in existing markets and enter new ones. Its focus includes international expansion in areas with significant growth potential.
EAT has been focusing on Chili’s international expansion through development agreements with new and existing franchise partners. It has also been supporting franchise partners with opportunities to expand sales through its virtual brand offerings. In fiscal 2024, Brinker opened nine Chili's restaurants. For fiscal 2025, the company plans to keep Chili's restaurant openings between nine to 11 locations.
Brinker raised its guidance for fiscal 2025. The company projects total revenues between $4.70 billion and 4.75 billion for fiscal 2025, an increase from the previous guidance of $4.55-$4.62 billion. EAT projects earnings per share of $5.2-$5.5 for fiscal 2025, up from the prior mentioned $4.35-$4.75.
EAT’s Earnings Estimates
The Zacks Consensus Estimate for fiscal 2025 and 2026 has witnessed upward revisions of 2.2% and 2.4% to $5.64 and $6.28, respectively.
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EAT Trades at a Discount
Brinker is currently valued at a discount compared with the industry on a forward 12-month P/E basis. EAT’s forward 12-month price-to-earnings ratio is 22.58, significantly lower than that of the industry. The company is trading at a discount compared with other industry players like Luckin Coffee Inc. LKNCY, The Wendy's Company WEN and El Pollo Loco Holdings, Inc. LOCO.
P/E (F12M)
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Wrapping Up
Brinker has showcased exceptional growth and resilience, fueled by initiatives like its "core four" offerings and innovative campaigns that appeal to a broad customer base. The company’s barbell pricing strategy strikes a balance between value and premium offerings, driving customer loyalty and profitability. Strong international expansion plans and partnerships with franchise operators position Brinker for sustained growth in emerging markets. Its robust earnings outlook and attractive valuation relative to peers highlight the stock's potential as an undervalued opportunity. With solid operational strategies and promising guidance, EAT is a compelling investment choice. The company currently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
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