On Thursday, Brinker International (NYSE:EAT) received an upgrade from KeyBanc from Sector Weight to Overweight. The firm has also set a new price target of $72.00 for the company's stock.
This decision came after Brinker's shares experienced an approximate 11% drop following their recent financial results, which contrasts with the S&P 500's slight increase of 0.3%.
KeyBanc sees the post-results dip in Brinker's share price as an attractive opportunity for investors. Despite the company's estimates being revised downwards, KeyBanc believes the market has misinterpreted Brinker's fiscal fourth-quarter 2024 performance. They credit the company for its same-store sales (SSS) and traffic, which outperformed expectations.
Brinker has chosen to reinvest some of its SSS growth upside, which is expected to impact fiscal year 2025 earnings. However, KeyBanc views this strategy as a positive long-term move for the company's sustainability and believes it will lead to earnings growth in the future.
The firm's analysis suggests that at approximately 13.5 times the estimated earnings per share (EPS) for fiscal year 2025, there is potential for Brinker's valuation multiple to expand. KeyBanc anticipates that as the market processes Brinker's recent results, it will come to recognize the company's prospects for more sustainable and consistent earnings growth.
In other recent news, Brinker International reported its fourth quarter earnings that did not meet analyst expectations, despite exceeding projected revenues. The company posted adjusted earnings per share of $1.61, falling short of the consensus estimate of $1.66.
However, it reported revenue of $1.21 billion, surpassing analyst projections of $1.15 billion. Comparable restaurant sales saw a 13.5% year-on-year increase, with Chili's and Maggiano's Little Italy, both subsidiaries of Brinker, experiencing a rise of 14.8% and 2.5% respectively.
Morgan Stanley maintained its underweight rating on Brinker shares, citing the need for a more comprehensive plan for bottom-line growth. For fiscal 2025, Brinker provided an optimistic outlook, forecasting an EPS of $4.35-$4.75 and revenue of $4.55-4.62 billion, both figures surpassing the current consensus estimates. These are among the recent developments surrounding Brinker International.
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