On Thursday, Evercore ISI adjusted its price target for Brinker International (NYSE:EAT) shares, the parent company of Chili's and Maggiano's, to $69.00, up from the previous target of $65.00. The firm has sustained its In Line rating for the restaurant company's stock.
The price target revision follows Brinker International's fourth-quarter results and subsequent discussions with the company. Evercore ISI is holding onto its above-consensus forecast for fiscal year 2025 earnings per share (EPS) at $5.00, which indicates a year-over-year increase of 22%, compared to the consensus estimate of $4.80.
The firm notes that while incremental investments and a cautious approach to raising menu prices may cap earnings potential, sales at Chili's have shown robust same-store sales (SSS) growth in the high single digits during the first five weeks of the quarter, surpassing the first-quarter consensus SSS growth of 6%.
Despite the positive sales momentum, the firm anticipates a slowdown in SSS trends through fiscal year 2025 due to more challenging comparisons from previous periods. The new price target of $69 represents a 9% upside potential and is derived from a discounted cash flow (DCF) analysis.
This valuation corresponds to 12 times the projected fiscal year 2026 EPS, which is within Brinker's 10-year historical range of 9 to 15 times, with an average of 12 times.
The maintained In Line rating suggests that Evercore ISI views Brinker International's stock as fairly valued based on current projections, and the firm does not foresee significant stock movement in either direction in the near term. The slight increase in the price target reflects the firm's response to the company's recent performance and expected future earnings.
InvestingPro Insights
InvestingPro data reveals a nuanced picture of Brinker International's (NYSE:EAT) financial health and market performance. With a market capitalization of $2.8 billion, the company's P/E ratio stands at 20.71, indicating the market's current valuation of its earnings. More optimistically, the adjusted P/E ratio for the last twelve months as of Q3 2024 is lower at 15.61, suggesting better earnings relative to the stock price in the near term. Additionally, Brinker has experienced a revenue growth of 4.98% over the last twelve months, a sign of expanding business operations.
From the perspective of InvestingPro Tips, it's noteworthy that Brinker International is trading at a low P/E ratio relative to its near-term earnings growth, which could signal an undervalued stock to potential investors. Moreover, analysts have revised their earnings upwards for the upcoming period, reflecting a positive outlook on the company's profitability. These insights are particularly relevant given Evercore ISI's revised price target and their above-consensus forecast for Brinker's fiscal year 2025 earnings per share.
For those interested in further analysis, InvestingPro offers additional tips on Brinker International, which can be found by visiting the dedicated page on their website. These insights could provide investors with a deeper understanding of the company's financial position and future potential.
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