Brinker International, Inc. (EAT) Hits Fresh High: Is There Still Room to Run?

Have you been paying attention to shares of Brinker International (EAT)? Shares have been on the move with the stock up 5.9% over the past month. The stock hit a new 52-week high of $47.5 in the previous session. Brinker International has gained 8.3% since the start of the year compared to the 8.8% move for the Zacks Retail-Wholesale sector and the 3.5% return for the Zacks Retail - Restaurants industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on January 31, 2024, Brinker International reported EPS of $0.99 versus consensus estimate of $0.94 while it missed the consensus revenue estimate by 0.36%.

For the current fiscal year, Brinker International is expected to post earnings of $3.69 per share on $4.34 billion in revenues. This represents a 30.39% change in EPS on a 4.91% change in revenues. For the next fiscal year, the company is expected to earn $4.07 per share on $4.49 billion in revenues. This represents a year-over-year change of 10.3% and 3.53%, respectively.

Valuation Metrics

Brinker International may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Brinker International has a Value Score of A. The stock's Growth and Momentum Scores are C and F, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 12.7X current fiscal year EPS estimates, which is not in-line with the peer industry average of 21.2X. On a trailing cash flow basis, the stock currently trades at 7.1X versus its peer group's average of 10.9X. Additionally, the stock has a PEG ratio of 0.76. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Brinker International currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Brinker International meets the list of requirements. Thus, it seems as though Brinker International shares could have potential in the weeks and months to come.

How Does EAT Stack Up to the Competition?

Shares of EAT have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Shake Shack, Inc. (SHAK). SHAK has a Zacks Rank of # 2 (Buy) and a Value Score of F, a Growth Score of A, and a Momentum Score of A.

Earnings were strong last quarter. Shake Shack, Inc. beat our consensus estimate by 88.89%, and for the current fiscal year, SHAK is expected to post earnings of $0.69 per share on revenue of $1.24 billion.

Shares of Shake Shack, Inc. have gained 37.6% over the past month, and currently trade at a forward P/E of 151.12X and a P/CF of 40.01X.

The Retail - Restaurants industry is in the top 34% of all the industries we have in our universe, so it looks like there are some nice tailwinds for EAT and SHAK, even beyond their own solid fundamental situation.

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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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