Truist Securities has increased the price target for Texas Roadhouse (NASDAQ: NASDAQ:TXRH) shares to $202 from $196, while maintaining a Buy rating on the stock.
The firm's analyst cited potential for a third-quarter sales outperformance and a strong underlying momentum as the reasons for the adjustment.
Texas Roadhouse has shown promising signs of growth, with same-store sales (SSS) rising by 8.0% in the initial four weeks of July.
The momentum seems to have picked up pace, with an approximate 250 basis points acceleration in sales growth over the following nine weeks. This trend supports the analyst's confidence that the company will surpass the consensus sales estimates.
The updated estimates from Truist Securities suggest that the third-quarter 2024 sales could reach $1.522 billion, which is 0.9% higher than the consensus and aligns closely with their revised expectation of a 9.0% increase in same-store sales, up from the previously predicted 8.5%. The company had previously reported a same-store sales increase of 8.2%.
Additionally, the favorable commodity costs have prompted the firm to revise its third-quarter restaurant-level margin estimate to 16.1%, up from 15.8%, which is above the consensus of 15.9%. Based on these factors, the earnings per share (EPS) estimate for the third quarter has been raised to $1.34, up from the previous $1.30 estimate and higher than the consensus of $1.30.
In other recent news, Texas Roadhouse announced a cash dividend of $0.61 per share, scheduled for payment in September. The casual dining chain also reported strong Q2 results, with earnings per share of $1.79, surpassing consensus by $0.15, and a significant rise in revenue, surpassing $1.3 billion. Analyst firms BMO Capital Markets and Stephens responded to these results by raising their price targets for Texas Roadhouse shares, while maintaining neutral ratings.
In addition, Texas Roadhouse has opened six new restaurants during the quarter and plans to open about 30 company-owned restaurants throughout the year. The company's recent developments also include a focus on technology initiatives, such as digital kitchens and potential new customer experience enhancements.
InvestingPro Insights
Texas Roadhouse's strong performance, as highlighted in the article, is further supported by recent data from InvestingPro. The company's revenue growth of 13.8% over the last twelve months and 14.51% in the most recent quarter aligns with the analyst's optimistic outlook on sales performance. This growth trend corroborates the expected sales outperformance mentioned in the article.
InvestingPro Tips reveal that Texas Roadhouse has a perfect Piotroski Score of 9, indicating strong financial health and operational efficiency. This score supports the analyst's positive stance on the company's performance. Additionally, the company has maintained dividend payments for 14 consecutive years, demonstrating financial stability and commitment to shareholder returns.
It's worth noting that Texas Roadhouse is trading near its 52-week high, with a price-to-earnings ratio of 31.83. This valuation metric, combined with the InvestingPro Tip that the company is trading at a high earnings multiple, suggests that investors are pricing in strong growth expectations, aligning with the analyst's bullish outlook.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Texas Roadhouse, providing a deeper understanding of the company's financial position and market performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.