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Brinker's Stock Holds Up After Solid Earnings Report

By: Investor's Business Daily
Posted: 1/24/2014 5:16:00 PM
Referenced Stocks: CMG;EAT

Despite a weak stock market,Brinker International ( EAT ) had a good week on the heels of a better-than-expected earnings report.

The restaurateur reported Q2 earnings of 59 cents a share, a penny better than estimates and an 18% increase over the year-ago period. Sales were $704.4 million, a 2% increase and slightly better than expected.

The stock gapped up out of a flat base on the news and held its gains Thursday and Friday as the market sold off.

Brinker operates or franchises 1,602 restaurants and has more than 100,000 employees in 32 countries. It's best known for its Chili's Grill & Bar, and also operates Maggiano's Little Italy.

The first Chili's, which specializes in Southwestern-inspired food, was opened in Dallas in 1975. It was the creation of Larry Lavine, who became fascinated after attending a chili cook-off in Terlingua, Texas, in 1967. In 1983, Norman Brinker bought the 23 Chili's restaurants and took the company public.

In the early 1990s, Chili's was a star performer among growth stocks. It's now a more mature company, but still growing.

Earnings dipped in the aftermath of the financial crisis in 2008, but by the next year were on the rise again and are now at an all-time high, along with the stock price.

Analysts forecast that Brinker's earnings will grow at a 17% clip in 2014 and by 15% in 2015.

Brinker began paying a 10-cent quarterly dividend in 2005. Today, it pays 24 cents.

That translates to an annual dividend of 96 cents a share and a 1.9% yield.

Brinker is trying to boost margins with efficiencies, such as new kitchen equipment, point-of-sale systems and waste management.

The retail-restaurant industry group has been doing pretty well. It's ranked No. 75 out of 197 tracked by IBD. It includes such recent stars asChipotle Mexican Grill ( CMG ).