Brinker (EAT) Stock Rises 55% in a Year: What's Driving It?

Shares of Brinker International, Inc. EAT have soared 54.6% over the past year against the industry's 4.3% decline. The company's impressive performance can be attributed to its expansion efforts, menu adjustments, digitalization and remodeling initiatives.

Recently, EAT reported solid third-quarter fiscal 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis. During the quarter, its performance was backed by sustained advancements in enhancing the guest experience, effective marketing strategies and traffic-driving initiatives.

Following the earnings release, estimates for fiscal 2024 and 2025 earnings have witnessed upward revisions. In the past 30 days, the consensus estimate for fiscal 2024 and 2025 earnings rose 6.2% and 6.6%, respectively.
Let’s delve deeper.

Growth Drivers

Brinker is one of the few fast-casual restaurant chains that have been expanding despite sluggish economic development. Management is gearing up for international expansion as well, especially in the faster-growing emerging markets.

This Zacks Rank #2 (Buy) company continues to focus on Chili’s international expansion through development agreements with new and existing franchise partners. It is also supporting franchise partners with opportunities to expand sales through its virtual brand offerings. For fiscal 2024, Chili’s has 10-11 new domestic openings and 19-24 new international openings scheduled in the pipeline.

Brinker emphasizes menu adjustments to drive growth. The company revised the menu by removing pictorial representations of wings and quesadillas to line listed, aiming to mitigate the trade-down effect observed from entrees. Additionally, it emphasized merchandising premium items through a new feature card in the menu.

In recent quarters, EAT has significantly ramped up its remodeling efforts, focusing on a comprehensive reimage program aimed at boosting traffic and comparable sales over the next three years. This initiative is set to enhance the brand's appeal and improve the guest experience.

Concurrently, Brinker is innovating its kitchen operations by testing new equipment to produce better-quality products more efficiently, thus increasing volume. Looking ahead to fiscal 2024 and beyond, management plans to invest aggressively in growth, aiming to double the number of new restaurant openings and expand its brand portfolio, thereby enhancing convenience, value and overall guest satisfaction.

Management is also investing heavily in technology-driven initiatives, like online ordering, to augment sales and boost guest services. It effectively uses social media platforms and email databases to drive customer awareness and boost traffic. Meanwhile, the To-Go platform has been the fastest-growing segment, especially at Chili’s.

Other Key Picks

Wingstop Inc. WING sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter negative earnings surprise of 21.4%, on average. The stock has risen 93.6% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for WING’s 2024 sales and earnings per share (EPS) suggests a rise of 27.5% and 36.7%, respectively, from the year-ago levels.

El Pollo Loco Holdings, Inc. LOCO carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 19.4%, on average. Shares of LOCO have risen 54.6% in the past year.

The Zacks Consensus Estimate for LOCO’s 2024 sales implies growth of 1.5% from the year-earlier actuals.

Carrols Restaurant Group, Inc. TAST carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 114.3%, on average. TAST’s shares have risen 75.7% in the past year.

The Zacks Consensus Estimate for TAST’s 2024 sales and EPS indicates 3.8% and 20.8% growth, respectively, from the prior-year levels.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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