A month has gone by since the last earnings report for Brinker International (EAT). Shares have lost about 8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Brinker International due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Brinker Q3 Earnings Beat Estimates, Revenues Rise Y/Y
Brinker reported third-quarter fiscal 2026 results, with earnings beating the Zacks Consensus Estimate while revenues missed the same. Both the top and bottom lines increased on a year-over-year basis.
In the quarter under review, Brinker reported adjusted earnings per share (EPS) of $2.90, surpassing the Zacks Consensus Estimate of $2.85. The company reported an adjusted EPS of $2.66 in the prior-year quarter.
In the fiscal third quarter, total revenues of $1.47 billion missed the consensus mark of $1.48 billion. The top line increased 3.2% on a year-over-year basis.
During the quarter, performance was supported by continued momentum at Chili’s, where comparable restaurant sales rose 4%, and guest demand improved meaningfully as weather-related headwinds in January eased.
Brinker’s Q3 Chili’s Results Stay a Bright Spot
Chili’s total revenues increased 4.5% year over year to $1,362.6 million. Company sales rose 4.3% to $1,348.1 million, while franchise revenues advanced 21.8% to $14.5 million from $11.9 million a year ago.
Comparable restaurant sales for Chili’s increased 4.0% year over year. Management noted that February and March comparable sales each rose 5.9% with positive traffic, contrasting with January’s 0.6% gain, which was pressured by Winter Storm Fern and one fewer operating day tied to a holiday shift.
EAT’s Q3 Maggiano’s Trends Remain Challenged
Maggiano’s results moved in the opposite direction. Total revenues declined 11.1% year over year to $107.6 million, and company sales fell 11.1% to $107.4 million.
Comparable restaurant sales decreased 4.6% year over year, reflecting pressure from lower traffic. Management cited unfavorable comparable restaurant sales and the impact of restaurant closures as the primary drivers, partially offset by menu pricing.
Brinker’s Q3 Operating Results Improved
In the fiscal third quarter, operating income increased 6.2% year over year to $166.6 million, while operating income as a percentage of total revenues expanded 30 basis points to 11.3%. Net income rose 7.4% to $127.9 million.
On a per-share basis, GAAP diluted earnings increased 12.1% year over year to $2.87 from $2.56. Restaurant operating margin (non-GAAP) edged up 0.2% to $267.4 million, though the margin rate slipped 50 basis points to 18.4% of company sales. Adjusted EBITDA increased 1.4% to $223.7 million from $220.6 million a year ago.
EAT’s Q3 Cost Lines Shift YoY
Food and beverage costs increased 5.7% year over year in the fiscal third quarter to $373.1 million and rose 60 basis points to 25.6% of company sales. Management attributed the rate increase to unfavorable commodity costs and menu mix, partially offset by menu pricing.
Restaurant labor rose 0.9% year over year to $456.4 million, but improved 60 basis points to 31.4% of company sales, aided by sales leverage and lower hourly labor. Restaurant expenses increased 5.2% to $358.6 million and rose 50 basis points to 24.6% of company sales, reflecting higher repairs and maintenance, delivery fees and to-go supplies, rent and other restaurant expenses, with leverage only partially offsetting those pressures.
Brinker’s Liquidity & Guidance Update
Cash and cash equivalents at the end of the thirty-nine-week period were $57.1 million, up 226.3% from $17.5 million a year ago. Net cash provided by operating activities rose 16.0% year over year to $571.8 million.
Management updated select fiscal 2026 guidance. Total revenues are still expected in the $5.78-$5.82 billion range. Non-GAAP net income per diluted share is now projected between $10.60 and $10.85, versus the prior outlook of $10.45-$10.85. Capital expenditures are expected to be $240-$250 million, down from $250-$260 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates review.
VGM Scores
Currently, Brinker International has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock has a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Brinker International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Brinker International, Inc. (EAT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).