Casual dining restaurateur,
Brinker International, Inc.
) is set to report fiscal second quarter 2014 results on Jan 22,
2014. In the last quarter, it delivered a negative earnings
surprise of 6.52%. Let's see how things are shaping up for this
Factors to Consider
Brinker has been experiencing macroeconomic headwinds for the
past few quarters. Government budget cuts, high tax rates and
still-tightened credit availability continue to hurt consumer
discretionary spending, which in turn lowered restaurant traffic.
Brinker's first-quarter fiscal 2014 results were disappointing
with both earnings and revenues missing the Zacks Consensus
Estimate. Sales were soft due to declining comps, which were hurt
by lower consumer traffic trends. Consumer traffic declined due
to a tight consumer spending environment in the U.S. We do
not expect traffic trends to improve much in fiscal second
Moreover, like other restaurant chains, Brinker is also facing
increasing food and beverage costs. Costs of poultry and dairy
remain major concerns. Moreover, owing to different sales
initiatives, operating costs are expected to go up, thus hurting
Our proven model does not conclusively show that Brinker
International is likely to beat earnings this quarter. That is
because a stock needs to have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here as you will see below.
Negative Zacks ESP
: The Expected Surprise Prediction or ESP for Brinker
International is -1.72% since the Most Accurate Estimate stands
at 57 cents per share, while the Zacks Consensus Estimate is
higher at 58 cents.
Zacks Rank #4 (Sell)
: Brinker International's Zacks Rank #4 when combined with a
negative ESP makes surprise prediction difficult. We caution
against stocks with Zacks Rank #4 and #5 (Sell rated stocks)
going into the earnings announcement, especially when the company
is seeing negative estimate revisions momentum.
Brinker International witnessed downward movement of estimates in
the past 30 and 60 days for the upcoming quarter as well as
fiscal 2014. The Zacks Consensus Estimate for the upcoming
quarter declined 4.9% to 58 cents over the last 30 days.
Other Stocks to Consider
Other stocks in the broader consumer discretionary sector that
have both a positive earnings ESP and a favorable Zacks Rank are:
Jack in the Box Inc.
), with Earnings ESP of + 1.54% and Zacks Rank #1 (Strong Buy).
Buffalo Wild Wings Inc.
), with Earnings ESP of + 0.94% and Zacks Rank #2 (Buy).
Cracker Barrel Old Country Store, Inc.
), with Earnings ESP of + 1.86% and Zacks Rank #2.
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