What happened
Shares of Texas Roadhouse (TXRH -0.07%) were catching fire today, after the steakhouse chain posted strong results in its third-quarter earnings report. The all-around pleasing report was a reversal from earlier quarters in the year. As a result, the stock was up 19.5% as of 12:36 p.m. EDT.
So what
The casual-dining chain posted solid comparable sales, up 4.4% at company-owned restaurants and up 3.2% at domestic franchised locations. Overall revenue increased 9.4% to $650.5 million, edging out analyst expectations for $648 million.
Image source: Texas Roadhouse.
Restaurant-level margins increased 49 basis points to 16.7%, as higher prices helped offset increased labor costs, driving operating income up 26.6% to $44.9 million. Earnings per share rose 29.1% to $0.52, ahead of estimates of $0.46.
CEO Kent Taylor said: "We are pleased to deliver a solid quarter of results driven by improved restaurant margins and comparable restaurant sales growth of 4.4%." He also noted that the company was targeting 30 restaurant openings next year, on top of an expected 22 new locations in 2019.
Now what
Looking ahead, Texas Roadhouse said that comparable sales were up 5.3% at company-owned restaurants through the first four weeks of the current quarter, a positive sign for the chain's momentum; it called for positive comparable sales for 2019 and 2020 as well.
After a rough year that saw the stock fall nearly 20% year to date coming into today's report, the third-quarter results are clearly reassuring investors. With comparable sales rising, margins improving, and new stores opening, Texas Roadhouse looks well-positioned for continued growth.
