Please ensure Javascript is enabled for purposes of website accessibility

Why Texas Roadhouse, Inc. Stock Surged Today

By Jeremy Bowman – Updated May 2, 2017 at 1:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the steakhouse chain jumped after a solid first-quarter earnings report.

What happened

Shares of Texas Roadhouse, Inc. (TXRH -2.10%) were heating up today after the steakhouse chain delivered a strong first-quarter earnings report. As of 11:59 a.m. EDT, the stock was up 9.9%.

So what

During a tough quarter for the restaurant industry, Texas Roadhouse said comparable sales increased 3.1% at company-owned restaurants and 3.8% at franchised locations. Overall revenue ticked up 10% to $567.7 million, topping estimates of $561.5 million, while the company overcame wage inflation on the bottom line to grow adjusted earnings per share from $0.53 to $0.61. That beat expectations of $0.59.

A Texas Roadhouse sign

Image source: Texas Roadhouse.

CEO Kent Taylor said, "We are pleased with our top-line momentum and operating performance with positive comparable sales and traffic growth, which continued through the first four weeks of the second quarter." Comps are up 2.6% thus far in the current period.

Now what

Texas Roadhouse's performance looks especially favorable compared to casual-dining peer Applebee's (a subsidiary of DineEquity Inc.), which said today that comparable sales fell 7.9% in its first quarter. 

Much of the restaurant industry has struggled with declining mall traffic, lower food prices that have made groceries cheaper by comparison, and rising wages. However, Texas Roadhouse's guidance indicates the company is on the right track as it forecast positive comparable-sales growth for the year and 30 new restaurant openings, growing the store base by about 6%.

With modest guidance like that, shares could continue moving higher this year if the company can keep up its solid earnings and comparable-sales growth.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Texas Roadhouse. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.