Time to Buy the Selloff in Brinker International's Stock After Earnings?

Brinker International EAT shares were down over -14% this morning after posting mixed results for its fiscal fourth quarter. Still, Brinker's stock is sitting on +60% gains this year as the operator of Chili's Bar & Grill and Maggiano's Little Italy.

Considering its stellar year-to-date performance, investors may be wondering if the post-earnings dip is a buying opportunity. To that point, Brinker has vastly outperformed the broader indexes and the Zacks Retail-Restaurants Market including two of its top industry peers in El Pollo Loco LOCO and Texas Roadhouse TXRH.

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Brinker's Q4 Results

Brinker's Q4 sales came in at $1.2 billion, rising 12% year over year and surpassing estimates of $1.15 billion by 4%. However, Q4 EPS of $1.61 missed expectations of $1.65 per share by -2% despite spiking 15% from the comparative quarter. Brinker had previously exceeded earnings expectations for seven consecutive quarters and has posted an astonishing average EPS surprise of 211.01% in last four quarterly reports.

Increased menu pricing at Chili's was a key driver to Brinker's performance with the company stating it continued to outperform the industry in both sales and traffic. Overall, Brinker's total sales increased 7% in fiscal 2024 to $4.41 billion with EPS soaring 45% to $4.10 compared to $2.83 per share in FY23.

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Favorable Guidance 

Going into FY25, Brinker expects total sales to be in the range of $4.55-$4.62 billion which came in above the current Zacks Consensus of $4.51 billion or 3% growth. Brinker guided EPS in the range of $4.35-$4.75 with the high end of its target falling in line with estimates of $4.73 per share or 13% growth.

Brinker's Attractive Valuation

Trading around $60, Brinker's stock is at a 14.8X forward earnings multiple which is an attractive discount to the S&P 500"s 22.9X. Furthermore, EAT trades well below its Zacks Retail-Restaurants Industry average of 25X forward earnings with Texas Roadhouse at 26.9X and El Pollo Loco at 15.7X.

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Takeaway

For now, Brinker's stock sports a Zacks Rank #1 (Strong Buy). The post-earnings dip may very well be a buying opportunity given Brinker's attractive valuation and compelling growth. That said, retaining this strong buy rating will likely depend on the trend of earnings estimate revisions in the coming weeks following its Q4 report.

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