Texas Roadhouse Inc.
(
TXRH
) has delivered positive earnings surprises for four straight
quarters with an average beat of 11.4%. Moreover, earnings
estimates have been increasing since this casual dining chain
posted strong second quarter results, helping it achieve a Zacks #2
Rank (Buy).
Along with these positives, a fairly impressive dividend yield of
2.1% and double-digit earnings growth expectations make Texas
Roadhouse a good pick for investors looking for both growth and
income.
Strong Q2 Results
On July 30, Texas Roadhouse reported second quarter earnings of 28
cents per share, outpacing the Zacks Consensus Estimate by 4 cents
or 16.7% and last year's earnings by 6 cents or 28.0%.
Total revenue climbed 15.0% from the prior-year quarter to $320.3
million. The upside was attributable to higher comparable sales
growth. Company-owned restaurant sales increased 14.6% to $317.5
million, whereas franchise royalties and fees grew 15.9% to $2.9
million. Comparable restaurant sales grew 4.5% at company-owned
restaurants and 4.8% at franchised restaurants.
During the quarter, restaurant operating margin expanded 91 basis
points (bps) to 19.1% based on dips of 50 bps in labor cost, 70 bps
in other operating costs and 10 bps in rent.
Outlook Increased
For 2012, Texas Roadhouse raised its earnings per share guidance to
between 94 cents and 96 cents from the previous outlook of 91 cents
to 93 cents. The earnings guidance includes legal settlement
charges of 4 cents.
Earnings Estimates Inching Higher
Over the past 60 days, the Zacks Consensus Estimate for 2012
increased 5.2% to $1.01, implying year-over-year growth of 14.2%.
For 2013, the Zacks Consensus Estimate is $1.12, representing
year-over-year growth of 11.7%.
Strong Dividend
In February 2012, Texas Roadhouse hiked its quarterly dividend by
12.5% to 9 cents per share, representing a solid yield of 2.1% and
a payout ratio of 35.0%. In contrast, the average dividend yield of
the industry is only 1.26%. This casual dining chain has been
consistently paying dividends to its shareholders since the company
initiated a dividend of 8 cents per share in February, 2011.
Attractive Valuation
Texas Roadhouse's valuation looks attractive on a P/E basis. Its
trailing twelve months P/E of 17.48x is at a discount to the peer
group average of 18.33x. Moreover, the stock is currently trading
at a forward P/E of 17.04x, a 4.9% discount to the peer group
average of 17.92x. Furthermore, the company has a long-term
estimated earnings per share growth rate of 14.5%, which is above
the peer group average of 12.7%.
Chart Reveals Strength
Since Jan 10, 2012, Texas Roadhouse shares have consistently fared
better than the simple moving average for 200 days or SMA (200).
Volume is fairly strong, averaging 729.4K daily.
With rising earnings estimates, strong growth projections, a
healthy dividend yield and an attractive valuation, Texas Roadhouse
offers an enticing upside potential going forward.
Based in Louisville, Kentucky, Texas Roadhouse specializes in
steaks and promotes a western theme at its chains. It operates
restaurants under the names of Texas Roadhouse and Aspen Creek. As
of June 26, 2012, Texas Roadhouse operated 309 company-owned and 72
franchised restaurants. With a market capitalization of $1.21
billion, Texas Roadhouse primarily competes with Brinker
International, Inc. (
EAT
) and Darden Restaurants, Inc. (
DRI
).
Want More of Our Best Recommendations?
Zacks' Executive VP, Steve Reitmeister, knows when key trades are
about to be triggered and which of our experts has the hottest
hand. Then each week he hand-selects the most compelling trades and
serves them up to you in a new program called
Zacks Confidential
.
Learn More>>
TEXAS ROADHOUSE (TXRH): Free Stock Analysis
Report
TEXAS ROADHOUSE (TXRH): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research