Brinker International (EAT) AI Stock Analysis

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Brinker International

(NYSE:EAT)

71Outperform

Brinker International's overall score is supported by strong financial performance and a positive earnings outlook. The company's operational improvements and strategic investments have resulted in significant same-store sales growth and margin expansion. However, high leverage and a relatively high P/E ratio pose risks. The technical indicators suggest mixed momentum, with potential overbought conditions.

Positive Factors

Earnings

EAT raised its FY25 EPS guidance to a range of $7.50-$8.00, reflecting stronger performance and increased revenue outlook.

Sales Performance

Chili's comp sales showed a highly impressive increase of 31.4%, significantly exceeding expectations and historical averages.

Negative Factors

Market Expectations

The stock’s risk-reward does not offer much room for error, with shares trading at multi-year highs across valuation metrics.

Stock Valuation

The stock is trading at high valuation levels, approximately 22x/19x, compared to its peer group.

Brinker International (EAT) vs. S&P 500 (SPY)

Market Cap

$6.07B

Dividend YieldN/A

Average Volume (3M)1.45M

Price to Earnings (P/E)23.1

Beta (1Y)0.92

Revenue Growth13.67%

EPS Growth69.41%

CountryUS

Employees68,852

SectorConsumer Cyclical

Sector Strength60

IndustryRestaurants

Share Statistics

EPS (TTM)5.76

Shares Outstanding44,406,857

10 Day Avg. Volume1,500,089

30 Day Avg. Volume1,445,848

Financial Highlights & Ratios

PEG Ratio0.33

Price to Book (P/B)N/A

Price to Sales (P/S)1.33

Price to Cash Flow (P/CF)7.40

P/FCF Ratio8.90

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$177.00

Price Target Upside33.17% Upside

Rating ConsensusHold

Number of Analyst Covering12

Brinker International Business Overview & Revenue Model

Company DescriptionBrinker International, Inc., together with its subsidiaries, engages in the ownership, development, operation, and franchising of casual dining restaurants in the United States and internationally. The company operates in two segments, Chili's and Maggiano's. As of June 30, 2021, it owned, operated, or franchised 1,648 restaurants comprising 1,594 restaurants under the Chili's Grill & Bar name and 54 restaurants under the Maggiano's Little Italy brand name. The company was founded in 1975 and is headquartered in Dallas, Texas.

How the Company Makes MoneyBrinker International generates revenue primarily through the operation of its restaurant brands, Chili's Grill & Bar and Maggiano's Little Italy. The company makes money from the sale of food and beverages at its company-owned restaurants, which account for the majority of its revenue. Additionally, Brinker earns income from franchise fees and royalties from franchised restaurant locations. This includes initial franchise fees and ongoing royalties based on a percentage of the franchisees' sales. The company also benefits from strategic partnerships and marketing initiatives, which help drive customer traffic and sales. Factors such as menu innovation, promotional activities, and cost management contribute significantly to Brinker's earnings, ensuring sustained revenue growth and profitability.

Brinker International Financial Statement Overview

Summary

Brinker International exhibits strong revenue growth and profitability with healthy cash flows, reflective of efficient operations. However, the high debt levels pose a risk, necessitating careful management to sustain financial health. The shift to positive equity signals improved balance sheet strength, though further progress is needed.

Income Statement

Positive

Brinker International demonstrates solid revenue growth with a notable increase of 26.4% in total revenue from 2020 to TTM 2024. The gross profit margin in TTM 2024 is robust at 36.6%, supported by a steady net profit margin of 5.4%. EBIT and EBITDA margins stand at 8.1% and 11.6% respectively, indicating efficient operations. However, the annual growth rate in revenue showed fluctuations, requiring attention to sustainability.

Balance Sheet

Neutral

The company's debt-to-equity ratio in TTM 2024 is high at 14.1, reflecting considerable leverage, which poses a potential risk. Nevertheless, the equity ratio improved to 5.1% from negative values in previous years, signifying a gradual strengthening of the balance sheet. The return on equity (ROE) is strong at 200%, but largely due to the small equity base.

Cash Flow

Positive

Operating cash flow to net income ratio is favorable at 2.1 in TTM 2024, indicating robust cash generation capabilities. Free cash flow rose significantly with a growth rate of 51.3% from the previous period, enhancing financial flexibility. Yet, high capital expenditures might impact future cash flow stability.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
4.83B	4.42B	4.13B	3.80B	3.34B	3.08B
	Gross Profit
707.00M	627.30M	500.10M	499.20M	503.30M	408.60M
	EBIT
388.70M	229.60M	144.40M	159.50M	199.30M	103.00M
	EBITDA
561.50M	400.70M	314.20M	325.70M	351.60M	226.80M
	Net Income Common Stockholders
263.00M	155.30M	102.60M	117.60M	131.60M	24.40M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
181.93M	64.60M	15.10M	13.50M	23.90M	43.90M
	Total Assets
1.84B	2.59B	2.49B	2.48B	2.27B	2.36B
	Total Debt
590.17M	2.00B	2.16B	2.27B	2.04B	2.40B
	Net Debt
408.25M	1.93B	2.15B	2.26B	2.02B	2.36B
	Total Liabilities
1.16B	2.55B	2.63B	2.75B	2.58B	2.84B
	Stockholders Equity
682.71M	39.40M	-144.30M	-268.10M	-303.30M	-479.10M
Cash Flow		Free Cash Flow
337.40M	223.00M	71.40M	101.90M	275.70M	140.50M
	Operating Cash Flow
552.60M	421.90M	256.30M	252.20M	369.70M	245.00M
	Investing Cash Flow
-211.20M	-192.20M	-174.20M	-234.20M	-90.90M	-194.00M
	Financing Cash Flow
-349.30M	-180.20M	-80.50M	-28.40M	-298.80M	-20.50M

Brinker International Technical Analysis

Technical Analysis Sentiment

Negative

Last Price132.91

Price Trends

50DMA

155.71

Negative

100DMA

144.24

Negative

200DMA

110.33

Positive

Market Momentum

MACD

-0.43

Negative

RSI

51.03

Neutral

STOCH

61.00

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EAT, the sentiment is Negative. The current price of 132.91 is below the 20-day moving average (MA) of 145.16, below the 50-day MA of 155.71, and above the 200-day MA of 110.33, indicating a neutral trend. The MACD of -0.43 indicates Negative momentum. The RSI at 51.03 is Neutral, neither overbought nor oversold. The STOCH value of 61.00 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for EAT.

Brinker International Risk Analysis

Brinker International disclosed 31 risk factors in its most recent earnings report. Brinker International reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Brinker International Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TXRH	78 Outperform	$10.29B	23.94	34.69%	1.62%	16.01%	42.54%
DRI	75 Outperform	$22.51B	21.71	48.22%	2.92%	5.00%	3.73%
CAKE	71 Outperform	$2.29B	13.87	41.18%	2.43%	4.13%	56.76%
EAT	71 Outperform	$6.07B	23.08	2390.91%	―	13.67%	69.41%
Sector *	59 Neutral	$10.97B	9.83	-1.56%	4.06%	1.31%	-16.49%
RRGB	41 Neutral	$57.12M	―	92.02%	―	-4.19%	-266.52%
BLMN	36 Underperform	$577.53M	―	-13.92%	13.51%	-7.42%	-153.35%

* Consumer Cyclical Sector Average

Performance Comparison

EAT

Brinker International

132.91

85.00

177.42%

DRI

Darden Restaurants

186.58

32.42

21.03%

RRGB

Red Robin Gourmet

3.04

-3.48

-53.37%

TXRH

Texas Roadhouse

153.22

6.10

4.15%

CAKE

Cheesecake Factory

44.23

10.68

31.83%

BLMN

Bloomin' Brands

6.26

-19.55

-75.75%

Brinker International Earnings Call Summary

Earnings Call Date: Jan 29, 2025 | % Change Since: -14.04% | Next Earnings Date: Apr 29, 2025

Earnings Call Sentiment Positive

The earnings call reflects a positive outlook with significant achievements in same-store sales growth, operational improvements, and financial performance. Despite challenges in competitive pricing and traffic decline at Maggiano's, the overall sentiment is strong due to successful marketing campaigns and strategic investments in kitchen technology.

Highlights

Record-Breaking Same-Store Sales Increase

Chili's reported same-restaurant sales up 31% year-over-year, significantly outperforming the industry.

Operational Improvements and Simplification

Successful operational changes including a 40% reduction in cook times for steak and the removal of complex stations such as the It's Just Wings station have streamlined operations and improved efficiency.

Introduction and Success of Marketing Campaigns

The Triple Dipper social media campaign and the Better Than Fast Food TV campaign have successfully driven traffic and guest counts, with Triple Dipper now representing 14% of total sales.

Strong Financial Performance

Brinker reported total revenues of $1.358 billion with consolidated comp sales of positive 27.4%. Adjusted diluted EPS was $2.80, up from $0.99 last year.

Margin Expansion

Restaurant operating margin came in at 19.1%, a 600 basis points improvement year-over-year.

Debt Reduction

The company repaid approximately $164 million in debt, significantly reducing financial leverage to 2.3 times.

Kitchen Technology Upgrades

Decision to accelerate investments in TurboChefs to improve cooking speed and quality, making kitchens more efficient and comfortable for staff.

Lowlights

Maggiano's Traffic Decline

Maggiano's reported comp sales growth of 1.8%, with a decline in traffic by 4.9%.

Challenging Competitor Pricing

Increased competitive promotional activity attempted to undercut Chili's pricing, testing the strength of Chili's value proposition.

Company Guidance

During Brinker International's Q2 fiscal 2025 earnings call, management provided robust guidance, highlighting their expectations for continued strong performance. The company raised its full-year revenue projection to a range of $5.15 billion to $5.25 billion, supported by impressive same-store sales growth of 27.4% in the second quarter, with Chili’s alone achieving a 31.4% increase. Adjusted diluted EPS for the full year is anticipated to be between $7.50 and $8.00. Key operational improvements, such as the introduction of TurboChef ovens and a focus on menu simplification, have contributed to a 600 basis point expansion in restaurant operating margin, now at 19.1%. Despite a temporary dip in labor alignment at the beginning of Q2, the company exited the quarter with labor levels where they wanted them, supporting sustained growth. The guidance also includes capital expenditures projected between $240 million and $260 million, with plans to further invest in operational efficiency and brand relevance.

Brinker International Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Brinker International Appoints Timothy Johnson to Board

Positive

Feb 18, 2025

On February 12, 2025, Brinker International appointed Timothy Johnson to its Board of Directors, bringing over 30 years of strategic and financial expertise from global retail brands to enhance Brinker’s industry leadership. Additionally, on February 18, 2025, Brinker announced a revised compensatory arrangement for Executive Vice President and CFO Mike Ware, aligning her rewards with peer benchmarks and recognizing her strong performance with a $585,000 annual salary and significant equity-based awards.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.