On Monday, Brinker International (NYSE:EAT) stock, was downgraded by Raymond James from a Strong Buy to a Market Perform rating, although its price target was raised to $82.50 from $62.00. The adjustment reflects the company's substantial stock price increase this year, which is estimated at approximately 65%.
The firm acknowledged Brinker's positive performance, citing a number of supporting factors. These include favorable estimate revisions and improved financial health, with store margins reaching the mid-teens and a net debt to EBITDA ratio expected to approach 1x in the near term, a significant improvement from levels greater than 3x before the COVID-19 pandemic.
Recent third-party data indicates a sharp acceleration in comparable sales for Chili's in May, attributed to effective advertising campaigns, value promotions, and a strong presence on social media.
Although the growth in comps has reportedly slowed since June, they continue to outperform the segment, which is particularly notable given that the television advertising campaign concluded on June 3.
The upgraded price target suggests that while the stock's current valuation is nearing what Raymond James considers fair value, there is still potential for growth. This is based on the company's solid margin and balance sheet improvements, which could justify higher valuation metrics compared to the pre-pandemic era.
The report concludes with an observation that despite the end of a major advertising push, Brinker's strong performance relative to its segment continues, signaling sustained momentum for the company.
In other recent news, Brinker International, parent company of Chili's and Maggiano's, has been the focus of several analyst revisions following impressive earnings results. Stifel has increased Brinker's price target from $62.00 to $90.00, maintaining a Buy rating based on the company's long-term projections and current marketing strategies.
BMO Capital Markets has also raised its stock price target to $65.00, citing stronger restaurant margins as a key driver. Evercore ISI has increased its price target to $53, maintaining an In Line rating, while Argus upgraded Brinker's stock rating from Hold to Buy, setting a price target of $72.00.
These revisions come after Brinker International reported a third-quarter fiscal year 2024 earnings per share (EPS) of $1.24, surpassing the consensus forecast by $0.09.
The company also projected solid earnings for fiscal year 2024, with total revenues expected to be in the range of $4.330 billion to $4.350 billion and adjusted earnings per share between $3.80 and $4.00. These are recent developments that reflect Brinker's ongoing recovery and growth potential.
InvestingPro Insights
Brinker International's recent performance has caught the attention of analysts and investors alike. InvestingPro data highlights a market capitalization of $3.15 billion and a forward-looking P/E ratio of 20.73, which is anticipated to adjust to a lower 17.57 in the last twelve months as of Q3 2024. This valuation comes alongside a modest revenue growth of 4.98% during the same period, showcasing the company's ability to increase its top line.
InvestingPro Tips suggest that analysts are optimistic about the company's future, with five analysts having revised their earnings upwards for the upcoming period. Additionally, Brinker's stock has delivered a high return over the last year, with a price total return of 94.74% as of the latest data. This aligns with the company's strong return over the last three months, indicating sustained investor confidence. Moreover, Brinker's share price is currently trading at 93.09% of its 52-week high, which underscores its recent upward trajectory.
For readers looking to delve deeper into Brinker International's financials and future prospects, more InvestingPro Tips are available, offering valuable insights that could inform investment decisions. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and access the full range of expert analysis and tips.
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