Texas Roadhouse Stampedes On EPS Beat as Comp Sales Surge 9.3%

Key Points

• Texas Roadhouse operates over 700 steakhouse-style casual dining restaurants, serving hand-cut steaks, freshly made sides, and warm cinnamon butter buns baked fresh every five minutes.
• Texas Roadhouse generated 9.3% same-store sales (SSS) or comparable growth in Q2 2024.
• Texas Roadhouse stock is forming a rare daily megaphone pattern.

Casual dining restaurant operator Texas Roadhouse Inc. NASDAQ: TXRH is an anomaly among dine-in restaurants. It continues to post impressive results, as evidenced by its solid Q2 2024 earnings report. The steakhouse-style restaurant chain continues to impress with its consistent growth metrics. Particularly outstanding is its 9.3% YoY same-store sales (SSS) growth in its latest quarter. This metric alone outshines some of the most well-known restaurant chains in the country.

Texas Roadhouse operates in the consumer discretionary sector and competes with restaurant operators Darden Restaurants Inc. NYSE: DRI, Brinker’s International Inc. NYSE: EAT, and Bloomin’ Brands Inc. NASDAQ: BLMN.

Texas Roadhouse Is Truly an Anomaly

Texas Roadhouse prides itself on its fresh, made-from-scratch sides and sauces, including bacon bits, croutons, and dressings. Its iconic buns are baked fresh every five minutes and served with honey cinnamon butter. Its hand-cut steaks are always fresh and never frozen, cut by an in-house butcher. It has all the makings of an expensive premium steakhouse without the expensive décor and furnishings. As customers walk into the restaurant, they can see the meat on display and actually pick which steaks they want for their meal.  

It's a testament to how well management operates this chain, separating itself from the pack even among steakhouses. Texas Roadhouse is a rare anomaly of premium food served at a value. It's like Michael Porter's Theory of Competitive Advantage morphed into one strategy where a premium product is sold under a low-cost distribution strategy.

Same-Store Sales Growth Is the Barometer For Restaurant Operators

The metrics speak for themselves. Same-store sales, also referred to as comparable sales, are data that gauge how well a restaurant is growing. Chipotle Mexican Grill Inc. NYSE: CMG is the king of the mountain among fast casual dining restaurants, with a whopping 11.3% SSS growth in its latest quarter. Sweetgreen Inc. NYSE: SG impressed analysts with its 5% SSS growth in its Q1 2024 report. CAVA Group Inc. NYSE: CAVA was only able to squeeze out 2.3% SSS growth in its recent quarter.

Among casual dine-in restaurants, Texas Roadhouse is the king of the mountain, with 9.3% SSS growth in Q2 2024. This is compared to the world's largest restaurant operator, Darden Restaurants, which posted 4% SSS growth in its recent quarter. Olive Garden posted SSS growth down 1.5%. Longhorn Steakhouse posted only 4% SSS growth, while Bloomin Brands-owned Outback Steakhouse saw SSS fall 1.2% in Q1 2024. Even premium fine dining establishment Fleming’s Prime Steakhouse & Wine Bar saw SSS fall 2%.

TXRH Stock is Forming a Bullish Megaphone Pattern

The daily candlestick chart for TXRH is forming a rare bullish pattern called a megaphone. This pattern forms from an upper trendline resistance comprised of higher highs and a lower trendline comprised of lower lows as the trading channel widens. The breakout triggers when shares surge through its upper trendline resistance. The daily relative strength index (RSI) has fallen to the 43-band. Pullback support levels are at $162.40, $158.06, $151.11, and $146.79.

Texas Roadhouse Smokes Consensus Estimates

The company reported Q2 2024 EPS of $1.79, beating consensus estimates for $1.64 by 15 cents. Revenues matched consensus estimates at $1.34 billion. Restaurant margins rose to 18.2%, up from 15.7% in the year-ago period, driven by higher average guest chat and improved labor productivity offsetting wage and other labor inflation of 4.4% and commodity inflation of 0.4%.

Average weekly sales at company restaurants were $158,991, of which $19.975 were to-go sales, compared to $146,727 and $18,496, respectively, in the year-ago period. Comparable restaurant sales or same-store sales increased 9.3% YoY at company restaurants and 8.3% at franchised restaurants. The company opened six new companies and three new franchise restaurants in the quarter.

Texas Roadhouse's Full Year 2024 Outlook

Texas Roadhouse provided its full-year 2024 outlook. Comparable sales for company-owned stores rose 8% YoY in the first four weeks of Q3 2024. Store week growth is expected to be around 7.5%, which includes the benefit of 2% from a 53^rd week. Commodity cost inflation is expected to be around 2%. Total capital expenditure is expected to be between $360 million and $370 million. Wage and labor inflation is expected to be between 4% and 5%.

Texas Roadhouse CEO Jerry Morgan commented, "We continued our momentum in the current quarter as strong traffic trends and some relief on commodity inflation led to increased profitability across all of our brands. With our operators delivering solid operating results and a balanced development pipeline, we are well positioned for the second half of the year."

Texas Roadhouse analyst ratings and price targets are at MarketBeat. There are 22 analyst ratings on TXRH stock, comprised of 10 Buys and 12 Holds, with a 2.24% upside to the average consensus price target of $169.86.