Why Shares of Brinker International Are Down 11% After Matching Earnings Estimates

Despite topping revenue estimates and matching adjusted earnings, shares of Brinker International are down Tuesday. Here's one possible reason.

Daniel Miller
Daniel Miller
Jan 29, 2019 at 4:17PM
Consumer Goods

What happened?

Shares of Brinker International (NYSE:EAT), a leading casual dining restaurant company with restaurants that include Chili's Grill & Bar and Maggiano's Little Italy, are down 11% as of 3 p.m. EST Tuesday after releasing fiscal second-quarter results. 

So what

Total revenue increased 3.2% to $790.7 million compared to the prior year, which managed to top analysts' estimates calling for $780.8 million. Same-store sales growth checked in at 1.8%, also ahead of estimates calling for a 1.4% increase. Excluding one-time items, Brinker's adjusted earnings-per-share checked in at $0.89, right in line with analysts' estimates.

Chili's appetizer of sliders, wings, and wraps.

Chili's triple dipper. Image source: Brinker International media gallery.

"Brinker delivered our fifth consecutive quarter of sequential sales improvement, posting positive sales and industry leading traffic," said Wyman Roberts, chief executive officer and president, in a press release. "Our sustained momentum is being driven by several key factors including operational execution, takeout, and value."


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Now what

Investors wondering why the stock is down 11% after beating top-line estimates and matching on the bottom line can probably look toward margins for their answer. Operating income as a percentage of total revenues checked in at 6.3% during the second quarter, down 80 basis points from the prior year's 7.1%. Restaurant operating margin as a percentage of company sales also declined from the prior year's 14.9% down to 12.4%. Despite disappointing margins, management had enough confidence in its outlook to raise full-year revenue growth to a range between 2% and 2.75%, compared to prior guidance between 1% to 2.25%. Management also bumped its adjusted earnings per share from $3.70 to $3.90 per share up to $3.75 to $3.95 per share.

Check out the latest Brinker International earnings call transcript.