Shares of Brinker International, Inc. EAT have been showing impressive gains recently. On Wednesday, the stock reached a new 52-week high of $132.08 before closing slightly lower at $130.69.
Over the past three months, EAT has outperformed its peers, including Dutch Bros Inc. BROS, Shake Shack Inc. SHAK and El Pollo Loco Holdings, Inc. LOCO. The stock has surged an impressive 86.1% compared with the Zacks Retail - Restaurants industry’s growth of 8.1%.
Brinker’s management has prioritized traffic growth, and its commitment to improving the guest experience has paid off. This strategic approach continues to attract investor confidence and push the stock higher.
Late last month, Brinker reported stellar first-quarter fiscal 2025 results and provided an optimistic outlook for fiscal 2025, leading to a 34.7% surge in the stock price since the earnings announcement. The company's strong fiscal first-quarter performance exceeded expectations, driven by effective marketing strategies, ongoing enhancements to the guest experience and a favorable menu item mix.
EAT’s 3-Month Price Performance
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With Brinker firing on all cylinders, investors now face a critical decision: jump in at current levels or wait for a potential pullback.
Factors Fueling EAT’s Momentum
Brinker’s focus on Chili’s "core four" offerings — burgers, crispers, fajitas and margaritas — has resonated with customers, particularly through successful campaigns like the "Big Smasher" and the value-driven "3 for Me" bundle. These initiatives, alongside tiered pricing, have attracted both value-conscious and higher-spending customers, contributing to robust profitability.
Brinker’s barbell pricing strategy for margaritas is effectively driving revenues and margins by offering options across the price spectrum. The introduction of the super-premium Don Julio margarita, priced above $10, has met expectations and appeals to customers seeking high-quality beverages. Meanwhile, the $6 Margarita of the Month, such as the October "Witches Brew," has achieved record-breaking sales, catering to value-conscious consumers. The company’s focus on maintaining a balance between value and quality has proven highly effective in meeting diverse guest preferences while maintaining profitability.
Tokenized customer data has provided actionable insights, identifying the 3 for Me campaign and social media-driven promotions as key traffic drivers. New guests are returning more frequently, with those purchasing the Triple Dipper generating 20% higher average checks. This data-driven approach enhances Chili’s ability to cater to a diverse customer base.
Brinker’s focus on delivering excellent food, service, and value is reflected in record-low guest issue metrics at Chili’s (standing at 2.7% in the fiscal first quarter) despite increased traffic. Investments in additional labor since June have sustained high service levels, enabling the company to handle accelerated guest traffic effectively.
What Lies Next for Brinker?
Looking ahead, Brinker aims to capitalize on its momentum with continued menu innovation, enhanced customer engagement through tokenized data analytics, and operational improvements across both brands. The introduction of new menu items, like Nashville Hot Mozzarella Sticks and premium margaritas, highlights Brinker’s commitment to innovation and customer appeal.
The implementation of a modern Oracle ERP system is improving back-office operations across finance, supply chain, and human capital management. Despite some expected challenges during the transition, the initiative has not disrupted daily operations, reflecting the team’s effective change management.
Brinker is applying lessons from Chili’s success to revitalize Maggiano’s brand. Efforts include menu simplifications, the introduction of new signature dishes, and innovative cocktails like the smoking-box Old Fashioned. The company emphasizes eliminating non-profitable offerings, such as $6 take-home pasta, to focus on improving the overall guest experience.
Upgraded Fiscal 2025 Guidance Lifts Confidence in EAT
The company raised its guidance for fiscal 2025. Brinker now projects total revenues for fiscal 2025 to range between $4.70 billion and 4.75 billion, an increase from the previous guidance of $4.55 billion to $4.62 billion. EAT projects fiscal 2025 earnings per share (EPS) in the range of $5.2-$5.5, up from the prior estimate of $4.35-$4.75.
The Zacks Consensus Estimate for EAT’s fiscal 2025 and 2026 EPS has moved up 18.5% and 17%, respectively, in the past 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
Image Source: Zacks Investment Research
EAT’s Technical and Valuation Insights
Technical indicators suggest continued strong performance for EAT. As of Wednesday, Brinker stock was trading above its 50-day moving average of $98.76 and its 200-day moving average of $69.69. The technical strength underscores positive market sentiment and confidence in EAT’s financial health and prospects.
EAT Stock Trades Above 50 and 200-Day Moving Average
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With a forward 12-month price-to-earnings of 22.78X, well below the industry average of 26.69X, the stock presents a potentially attractive valuation for investors.
Image Source: Zacks Investment Research
Our Thoughts
Brinker’s exceptional performance, fueled by innovative strategies, strong financial results, and operational excellence, positions the stock as a compelling investment opportunity. With its effective marketing campaigns, data-driven customer insights, and menu innovations, the company has demonstrated an ability to capture market share and sustain growth.
While waiting for a pullback may appeal to cautious investors, Brinker’s upward momentum, revised guidance, and below-average valuation make a compelling case to act now. Given its continued momentum and a promising outlook, we believe that this Zacks Rank #1 (Strong Buy) stock is an ideal candidate for investors' portfolio addition.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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Brinker International, Inc. (EAT) : Free Stock Analysis Report
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