On Thursday, Evercore ISI made a notable adjustment to Brinker International's (NYSE:EAT) stock financial outlook, increasing its price target to $110, up from the previous $90. The firm maintained its In Line rating.
This change follows the assessment of Brinker's first-quarter results and subsequent discussions with the company, which led to an upward revision of fiscal year 2025 earnings per share (EPS) estimates from $5.26 to $5.66, a 38% year-over-year increase and notably above the consensus of $4.85.
Evercore ISI's revised forecast anticipates a moderation of same-store sales (SSS) growth, projecting a decline from estimated mid-teens growth in October to 4% in the fourth fiscal quarter, against a challenging comparison from the previous year's 14.8% SSS.
Despite these tougher comparisons, Brinker's sales momentum has been stronger than expected, buoyed by effective value marketing strategies and increased social media engagement. The company has seen customer visit frequency improve, with the average interval between visits shrinking from 37 weeks to 31 weeks.
The firm's optimistic outlook is also based on Brinker's readiness to implement a comprehensive marketing plan designed to outperform in the fourth fiscal quarter. The analyst's raised EPS estimates for fiscal years 2025 and 2026 support the new price target of $110, which is derived from a discounted cash flow (DCF) analysis and equates to 17 times the projected fiscal year 2026 EPS of $6.53, a 15% year-over-year increase and higher than the consensus estimate of $5.42.
For fiscal year 2025, Evercore ISI expects Brinker to achieve a 10% growth in Chili's company-owned SSS and a restaurant margin of 15.0%, which would represent a 160 basis point improvement year-over-year, surpassing the consensus of 13.9%. The firm also anticipates that the fiscal year 2026 EPS growth of 15% will align with the company's targeted annual EPS growth range of 13-17%.
Evercore ISI's analysis also outlines potential scenarios that reflect the inherent operating leverage within Brinker's business model. The firm presents a one-year upside scenario with a price target of $140, as well as a downside scenario that could see the stock falling to $60, highlighting the wide range of possible outcomes in the company's financial performance.
In other recent news, Brinker International, the parent company of Chili's and Maggiano's, reported robust financial results for the first quarter of fiscal year 2025. The company's total revenues reached $1,139 million, marking a 13% increase in consolidated comparable sales.
Additionally, the adjusted diluted earnings per share (EPS) saw a substantial rise to $0.95, up from $0.28 in the previous year. This positive performance was attributed to effective marketing campaigns, operational efficiencies, and strategic investments, leading Brinker to raise its revenue and EPS guidance for fiscal 2025.
In light of these developments, BMO Capital Markets adjusted its stance on Brinker International stock, shifting its rating from Outperform to Market Perform, while increasing its price target for the company's shares from $80.00 to $105.00. Similarly, JPMorgan shifted from an Overweight to a Neutral rating, while notably increasing the price target to $100 from the previous $67.
Brinker International also reported a 14.1% increase in comparable store sales for Chili's and a 4.2% rise for Maggiano's. These recent developments reflect Brinker's confidence in its growth trajectory. The company's strong start to fiscal 2025, marked by increased sales and profitability, sets a positive tone for the forthcoming quarters.
InvestingPro Insights
Brinker International's recent performance aligns with several key metrics and insights from InvestingPro. The company's stock has shown remarkable strength, with a 207.34% price total return over the past year and a 94.5% return in the last six months. This robust performance is reflected in InvestingPro Tips, which note that the stock is trading near its 52-week high and has seen significant returns over various time frames.
The company's financial health appears solid, with InvestingPro Data showing a market capitalization of $4.67 billion and revenue of $4.42 billion over the last twelve months as of Q4 2024. The revenue growth of 6.82% during this period, coupled with a quarterly growth of 12.34%, supports Evercore ISI's optimistic outlook on Brinker's sales momentum.
InvestingPro Tips also highlight that 11 analysts have revised their earnings upwards for the upcoming period, aligning with Evercore ISI's increased EPS estimates. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.61, suggesting potential undervaluation despite the recent stock price surge.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Brinker International, providing a deeper understanding of the company's financial position and market performance.
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