Source: Investing Published 08/15/2024, 11:50
On Thursday, Brinker International Inc. (NYSE: EAT) received an upgrade from Sector Weight to Overweight from KeyBanc. The firm also set a new price target for the company’s stock at $72.00.
The decision came after Brinker shares saw a nearly 11% drop following its recent financial results, contrasting with the S&P 500’s slight gain of 0.3%.
KeyBanc sees Brinker’s post-earnings decline as an attractive opportunity for investors. Despite the company’s downward revision of estimates, KeyBanc believes that the market has misinterpreted Brinker’s performance in Q4 FY24. They credit the company with same-store sales (SSS) and traffic, which beat expectations.
Brinker has chosen to reinvest some of the upside into SSS growth, which is expected to impact FY25 earnings. However, KeyBanc views this strategy as a positive long-term move for the company’s sustainability and believes it will lead to earnings growth going forward.
The company’s analysis suggests that at around 13.5 times FY25 EPS, there is potential to expand Brinker’s valuation multiple. KeyBanc expects that as the market processes Brinker’s recent results, the market will recognize the company’s prospects for more sustainable and consistent earnings growth.
In other recent news, Brinker International reported Q4 earnings that missed analysts’ expectations, despite beating revenue forecasts. The company reported adjusted earnings per share of $1.61, missing analysts’ estimates of $1.66.
However, it reported revenue of $1.21 billion, beating analysts’ expectations of $1.15 billion. Comparable restaurant sales increased 13.5% year-over-year, with Brinker’s Chili’s and Maggiano’s Little Italy restaurants up 14.8% and 2.5%, respectively.
Morgan Stanley maintained its Underweight rating on Brinker shares, citing the need for a more comprehensive plan for earnings growth. For fiscal 2025, Brinker gave an upbeat outlook for fiscal 2025, forecasting EPS of $4.35 to $4.75 and revenue of $4.55 to $4.62 billion, both figures above current estimates. These are among the recent developments surrounding Brinker International.
