Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

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

By Daniel Miller - Updated Apr 23, 2019 at 11:50PM

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

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

What happened?

Shares of Brinker International ( EAT 2.64% ), 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."

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Brinker International, Inc. Stock Quote
Brinker International, Inc.
EAT
$36.13 (2.64%) $0.93

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

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