On Wednesday, Evercore ISI adjusted its financial outlook for Brinker International (NYSE:EAT), the parent company of Chili's and Maggiano's restaurants, by increasing its price target to $53 from the previous $50, while maintaining an In Line rating. The revision follows Brinker International's third fiscal quarter results, which surpassed expectations and showed strong momentum as the company heads into its fourth fiscal quarter.
The firm has updated its earnings per share (EPS) estimates upwards by a few percent, attributing the change to Chili's successful multifaceted strategy. This strategy encompasses improved operations, menu renovations, innovation, and value marketing, which have collectively contributed to a significant same-store sales (SSS) gap compared to the industry—8 percentage points in the third fiscal quarter and potentially widening in the fourth.
Despite the positive adjustments, the firm expressed concerns about the long-term viability of Brinker International's high-low menu pricing strategy. However, current traffic trends and the sales mix of the $10.99 "3 for Me" offering, which now accounts for 16% of sales, an increase of 50 basis points year-over-year, seem to support the company's approach.
The updated price target of $53 is equivalent to 12 times the estimated earnings per share for the calendar year 2025. Following an 8% stock price increase through the earnings announcement, Evercore ISI has decided to remove its Tactical Outperform rating.
InvestingPro Insights
As Brinker International (NYSE:EAT) garners attention with its revised financial outlook and increased price target from Evercore ISI, real-time data and InvestingPro Tips offer additional context for investors considering the company's stock. According to InvestingPro, seven analysts have recently revised their earnings upwards for the upcoming period, reflecting optimism about the company's earnings potential. Moreover, the stock has shown a significant return over the last week with a 12.63% price total return, indicating strong recent performance.
InvestingPro data highlights a market capitalization of $2.37 billion and a P/E ratio of 15.55, which adjusts to 13.25 when considering the last twelve months as of Q2 2024. This indicates that the company is trading at a lower P/E ratio relative to its near-term earnings growth, which could be appealing for value-focused investors. Additionally, Brinker International has experienced a revenue growth of 6.76% over the last twelve months as of Q2 2024, suggesting a steady increase in its business operations.
For those looking to delve deeper into Brinker International's financials and stock performance, InvestingPro offers additional tips. There are 12 more InvestingPro Tips available for EAT, providing a comprehensive analysis of the company's financial health and market position. Interested investors can access these tips and more detailed metrics by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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