Yahoo Finance Brinker (EAT) Stock Rises 107% in a Year: What's Driving It?
Shares of Brinker International, Inc. EAT have surged 106.7% in the past year against the industry’s 5.7% fall. The company is benefiting from expansion efforts, menu adjustments, digitalization and remodeling initiatives. Also, the focus on Chili's bodes well. The company intends to focus on balancing value offerings with margin expansion and adaptability to changing consumer preferences to drive growth.
This Zacks Rank #2 (Buy) company’s earnings estimates for the fiscal 2024 showcase growth rate of 42.1% from the year-ago period’s tally on a 5.1% revenue improvement. Its earnings topped the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 213.4%. Earnings estimates for fiscal 2024 have increased to $4.02 per share from $3.94 in the past 30 days. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and prospects of further outperformance in the near term.
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The upside is supported by its solid VGM Score of A, contributed by a Value, Growth and Momentum Score of A. The company also has a long-term earnings growth rate of 20.6%.
What’s Driving the Stock?
Expansion Efforts: Brinker, a fast-casual restaurant chain, is expanding despite sluggish economic growth. EAT plans to grow internationally, focusing on emerging markets. The company aims to expand in current and new markets, prioritizing regions with high growth potential.
The company continues to focus on Chili’s international expansion through development agreements with new and existing franchise partners. It is also supporting franchise partners with opportunities to expand sales through its virtual brand offerings. For the fiscal 2024, Chili’s has 10-11 new domestic openings and 19-24 new international openings scheduled in the pipeline.
Remodeling Initiative: The company’s remodeling efforts have gained traction in recent quarters. The company is actively investing in a brand-wide reimage program, expected to enhance traffic and sales over the next three years. This initiative aims to bolster Brinker's brand potential and improve guest experiences. The company is innovating its kitchen operations by testing new equipment to increase efficiency and production volumes.
The company is positioned to invest aggressively to grow its business in fiscal 2024 and beyond. For the coming year, Brinker’s will look for more ways to offer convenience, value, and a great guest experience by doubling its pipeline of new restaurant openings and expanding its portfolio of brands.
Menu Adjustments: EAT emphasizes menu adjustments to drive growth. During the fiscal third quarter, the company introduced the ‘big smasher’ burger. While the new burger is a permanent addition to the regular menu, it will be available for a limited time at a special price of $10.99. The initiative serves as a part of its ongoing efforts to refresh its Everyday Value platform and attract attention and increase foot traffic.
Also, it launched two simplification initiatives alongside the big smasher launch to streamline operations for its restaurant teams. This adjustment not only provides guests with more meat but also contributes to a slight reduction in food costs while simplifying operations. Going forward, the company intends to focus on balancing value offerings with margin expansion and adaptability to changing consumer preferences to drive growth.
Focus on Chili's: Chili’s turnaround strategies showed positive outcomes, with increased traffic and sales. These efforts simplified Chili’s core menu through enhanced recipes, using higher-quality ingredients, and adopting new cooking methods to offer improved food at attractive prices. The company continues to explore innovative approaches to attract new customers and solidify Chili's market standing.
During the fiscal third quarter, revenues in the Chili’s segment rose 3.8% year over year to $999.6 million. The upside was primarily driven by increased menu pricing. During the quarter, domestic comps at Chili’s (including company-owned and franchised) rose 3.6% year over year. The company emphasizes advertising efforts to drive traffic and increase brand relevance. It is optimistic about Chili's growth plans through fiscal 2024 and expects to outperform the industry in terms of sales.
Other Key Picks
Some other top-ranked stocks in the Zacks Retail-Wholesale sector include:
Wingstop Inc. WING sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter negative earnings surprise of 21.4%, on average. The stock has surged 113.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WING’s 2024 sales and EPS suggests a rise of 27.9% and 37.1%, respectively, from year-ago levels.
Abercrombie & Fitch Co. ANF currently carries a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 210.3%, on average. ANF’s shares have risen 368.9% in the past year.
The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and EPS indicates 10.4% and 47.3% growth, respectively, from the year-earlier actuals.
El Pollo Loco Holdings, Inc. LOCO currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 19.4%, on average. LOCO’s shares have risen 22.2% in the past year.
The Zacks Consensus Estimate for LOCO’s 2025 sales and EPS indicates 3.8% and 9.9% growth, respectively, from prior-year figures.
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