On Jul 4, 2013, Zacks Investment Research upgraded
Brinker International Inc.
) to a Zacks Rank #1 (Strong Buy) based on its upbeat outlook for
the full year. Since the release of its third-quarter earnings,
its share price has risen about 8.7%.
Why the Upgrade?
Despite a slowdown in the restaurant industry, management expects
comparable restaurant sales to increase 2%-3% year over year in
fiscal 2013 with a price increase of 1% to 2% at Chili's.
Operating margin is likely to increase as much as 100 bps. In
addition, a share repurchase program will also boost earnings
Brinker has outlined a set of initiatives including new
kitchen equipment system, an effective marketing strategy and an
integrated point-of-sale system to reinvigorate its brands. Its
foray into the new pizza category is also a positive for the
stock. Extensive refurbishment of units is also in the cards. We
expect these schemes to benefit its results in the forthcoming
On Apr 23, despite registering flat revenues of $742.8
million, Brinker reported third-quarter fiscal 2013 adjusted
earnings of 72 cents per share, up 20% year over year and ahead
of the Zacks Consensus Estimate by 4.3%. Higher margins and the
company's "Plan to Win" initiative led to this increase.
Brinker's restaurant operating margin expanded 70 basis points
(bps) to 17.9%, benefiting from increased margins at two of its
segments -- Chili's and Maggiano's.
The restaurateur is expected to report its fourth-quarter
earnings on Aug 2, 2013. The Zacks Consensus Estimate at the
moment is 75 cents per share which represents more than 20% jump
Other Stocks to Consider
Some other players which attained Zacks Rank #1 (strong Buy)
this week include
Ruth's Hospitality Group Inc.
Krispy Kreme Doughnut Inc.
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