On Friday, BMO Capital Markets adjusted its outlook on Texas Roadhouse (NASDAQ: NASDAQ:TXRH), increasing the price target to $162 from the previous $155. The firm maintained its Market Perform rating on the stock. The update followed the company's third-quarter earnings for 2024, which showed an earnings per share (EPS) of $1.26, falling short of the consensus estimate by $0.06. This discrepancy was attributed to higher depreciation and amortization, taxes, and insurance adjustments.
Texas Roadhouse reported that quarter-to-date comparable sales growth of 8.3% is surpassing consensus expectations, with customer traffic picking up pace in October. The company largely reaffirmed its guidance for the year 2024, with some adjustments. Notably, food inflation expectations were reduced to less than 1% from the previously anticipated 2%, and the tax rate was adjusted to 15% from 14.5%.
Looking ahead, Texas Roadhouse introduced its guidance for the year 2025, which includes a forecast for low food inflation ranging between 2% and 3%. This projection came as a surprise to the market. BMO Capital acknowledged Texas Roadhouse's strong comparable sales growth amidst a challenging environment. However, the firm has decided to remain neutral on the stock, citing an elevated valuation multiple and the belief that the consensus EPS for 2025 may be overly optimistic.
In other recent news, Texas Roadhouse has been the focus of several analyst updates following its third-quarter financial results for 2024. The steakhouse chain reported earnings per share of $1.26, falling short of the consensus estimate of $1.32, but achieved an 8.5% year-on-year increase in revenue, meeting estimates at $1.27 billion. Truist Securities raised the company's price target from $202.00 to $207.00, maintaining a Buy rating, influenced by robust same-store sales and increased customer traffic.
Baird also maintained an Outperform rating on Texas Roadhouse and raised the price target to $205, citing the company's solid earnings performance and a positive start to the fourth quarter. Furthermore, UBS maintained a Buy rating and increased its price target from $200 to $210, highlighting the company's strong same-store sales momentum and favorable guidance for 2025.
The company's future expectations include a projected 5% store week growth and commodity inflation of 2% to 3% for 2025. Texas Roadhouse also announced plans for the opening of approximately 30 company-owned units and the acquisition of 13 franchise units.
InvestingPro Insights
Texas Roadhouse's recent performance and future outlook can be further illuminated by data from InvestingPro. The company's revenue growth of 13.8% over the last twelve months, coupled with a robust EBITDA growth of 23.22%, underscores the strong comparable sales growth noted by BMO Capital. This growth trajectory is reflected in the stock's impressive year-to-date price total return of 49.7%.
However, investors should be aware that Texas Roadhouse is trading at a high P/E ratio of 32.87, which aligns with BMO Capital's observation of an elevated valuation multiple. This valuation metric, combined with the fact that the stock is trading near its 52-week high (98.97% of its peak), suggests that much of the company's positive performance may already be priced in.
InvestingPro Tips highlight that Texas Roadhouse has maintained dividend payments for 14 consecutive years and has raised its dividend for 3 consecutive years, with a current dividend yield of 1.35%. This consistent dividend policy may appeal to income-focused investors, despite the high valuation.
For those considering a deeper dive into Texas Roadhouse's financials and prospects, InvestingPro offers 17 additional tips, providing a more comprehensive analysis of the company's strengths and potential challenges.
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