Brinker International Heats Up on Spicy Earnings Beat and Raise

Key Points

• Brinker International operates over 1,600 Chili’s Grill and Bar and Maggiano’s Little Italy restaurants.
• Brinker sponsored NASCAR driver Corey LaJoi’s car during the Daytona 500 with every general manager’s name on the hood.
• Brinker beats fiscal Q3 2024 EPS by 9 cents and raised full-year 2024 EPS forecasts for $3.80 to $4.00, beating $3.69 consensus estimates.

Shares of restaurant operator Brinker International Inc. NYSE: EAT surged to 52-week highs after reporting a solid fiscal Q3 2024 earnings report. The consumer discretionary sector company operates Chili's Grill and Bar and Maggiano's Little Italy restaurants under a franchise and company-owned model. It's Just Wings is a virtual brand that operates out of 1,000 company-owned Chili's and Maggiano's restaurants. Brinker operates over 1,600 restaurants in the United States, 2 U.S. territories and 27 other countries.

Brinker International competes for consumer dollars with Darden Restaurants Inc. NYSE: DRI and Bloomin' Brands Inc. NASDAQ: BLMN.

Daily Ascending Triangle Breakout

EAT formed a daily ascending triangle breakout pattern. The ascending trendline formed at $43.37 on April 17, 2024, comprised of higher lows on pullbacks. The upper flat-top trendline resistance formed at $50.40. EAT broke out through the resistance on its stellar earnings report and formed a small gap to test $50.40 before it continued to grind higher to new 52-week highs at $54.78. The daily relative strength index (RSI) bounced above the 70-band. Pullback support levels are at $53.02, $50.40, $46.95 and $44.62.

Stellar Results

Brinker reported fiscal Q3 2024 EPS of $1.24, beating analyst estimates for $1.15 by 9 cents. Revenues climbed 3.4% YoY to $1.12 billion, matching consensus estimates. Comparable restaurant sales rose 3.3%, with an increase in comparable restaurant sales of 3% for Chili's and 1.7% for Maggiano's.

Chili's Performance  

Chili's sales rose primarily due to favorable comparable restaurant sales driven by increased menu prices that were partially offset by lower traffic. The company purposely decided to deemphasize its virtual brands and unfavorable menu item mix. Company-owned restaurant expenses decreased due to sales leverage, lower delivery fees and to-go supplies and menu pricing. An increase in labor, advertising and various restaurant expenses offset this. Chilli's franchises generated $216.2 million, up from $213.6 million in the year-ago period.

Maggiano’s Performance  

Maggiano's sales rise was attributed to higher menu prices, a favorable menu item mix, and favorable comparative restaurant sales, which were partially offset by lower traffic. Restaurant expenses decreased slightly due to an increase in menu prices offset by increased repair and maintenance costs and miscellaneous restaurant expenses.

Upside Guidance

Brinker International raised upside guidance for the fiscal full year 2024. Brinker expects full-year EPS between $3.80 to $4.00, beating $3.69 consensus estimates. Prior forecasts called for EPS of $3.45 to $3.70. According to consensus estimates, fiscal full-year 2024 revenues are expected to be between $4.13 and $4.35 billion versus $4.34 billion. Capital expenditures are expected to be between $185 million to $195 million.

CEO is Upbeat

Brinker CEO Kevin Hochman noted that the business had bounced back from challenging weather-impacting performance. February and March were strong rebound months. Chilli beat industry sales averages by over 7% and traffic by 4% in the quarter. It's a testament to the strategy the company has been implementing for the past two years, notably with February's performance, since the company didn't advertise that month. March has also been an outperformance month. The company effectively left increased media from 2023.

Traffic Driving Tailwinds

Brinker's traffic-driving initiatives, combined with real operational improvements, have created tailwinds for the business. Its primary KPI dine-in guest experience has been a key focus. Dine-in GWAP dropped to 3.3% in the quarter, which is the lowest it has ever been. Industry-leading managers and hourly turnover have been critical elements to the tailwinds. The company's NASCAR sponsorship of driving Corey LaJoi's car during the Daytona 500 has been a boon for customers and staff. The car has the general manager's name on the car hood.

Driving Home Superior Value

Brinker's has improved the menu and proactively addressed the rising costs of dining out. The company launched its new burger, "The Big Smasher," a half-pounder burger with Thousand Island dressing, cheese pickles, lettuce and red onions on a brioche bun. It's $10.99 on the regular menu and available for the 3 For Me for a limited time as part of its Everyday Value platform. Value is a theme that the company has been emphasizing as social media is chock full of consumer frustration over high fast food prices. Chilli's is also eliminating the secret sauce burger from its value menu.

Hochman concluded, "The ongoing momentum in our business encourages us that our strategy is working, and the investments we're making are strengthening the core business, setting us up for long-term sustainable growth."

Brinker International analyst ratings and price targets are at MarketBeat.