Texas Roadhouse (NASDAQ:TXRH) handily bested third-quarter 2019 expectations as consumers continue to flock to the Texas-themed steakhouse and casual diner.Even with a recession on everyone's minds right now, this chain's big portions at a value are winning in the restaurant wars.

With labor expenses moderating and sales still in growth mode, Texas Roadhouse remains one of the best stocks in the restaurant industry.

A plate of food from Texas Roadhouse: a steak, fried chicken, corn, and vegetables.

Image source: Texas Roadhouse.

Reliable sales growth and resurgent earnings

Roadhouse didn't get off to the best of starts this year. Through the first six months of 2019, sales were up 9.8%, but high operating expenses -- especially labor and general admin as the company rolled out voluntary compensation increases for partners and complied with state minimum wage hikes -- led to a 3.6% drop in earnings per share. Ouch.

As I figured they might, earnings notched a big rebound in the third quarter. Revenue was up 9.4%, but total operating costs increased only 8.3% -- leading to a 29% year-over-year surge in earnings per share. Paired with the first half, the restaurant's results are looking much better than they were at the last quarterly update.

Metric

Nine Months Ended Sept. 24, 2019

Nine Months Ended Sept. 25, 2018

Change

Revenue

$2.03 billion

$1.85 billion

9.7%

Operating expenses

$1.87 billion

$1.70 billion

10.3%

Earnings per share

$1.85

$1.78

3.9%

Data source: Texas Roadhouse.

Responsible for the rosy numbers was Roadhouse's continued expansion (it opened up three Texas Roadhouses, one Bubba's 33 sports bar, and two international franchises), as well as what has become perennial comparable-store growth at existing locations. Comps were up 4.4% at company-owned locations and up 3.2% at franchises during the quarter, making for year-to-date totals of 4.8% and 4.0% comps growth at company-operated and franchised locations, respectively.

Speaking to the newer Bubba's 33 concept, CEO Wayne Kent Taylor had this to say during the earnings call:

Sales growth continued at Bubba's 33 this quarter with 20 restaurants and a comp base generating growth of 8.8%. Our test of adding lunch in five Bubba locations, which began earlier this year, contributed 2.5% of that growth. AKA, 8.8% minus 2.5% equals 6.3% growth, yee-haw.

Yee-haw indeed. Roadhouse and its new sports bar chain both handily outpaced the industry; according to restaurant researcher TDn2K, average U.S. restaurant comps were negative 0.4% in the third quarter.

An early look into 2020

Permitting for new construction has been slow going, so some of management's expected new store openings are going to get pushed into the new year now. Full-year 2019 openings are expected to be 22, and a handful of stores that cut ribbons in October brings the company's total count to 602. In 2020, though, Taylor and friends said there will be at least 30 new stores, including as many as eight Bubba's.

While investors have come to expect slow and steady expansion aided in large part by Roadhouse's surefire comps growth, expenses will again be a line item to watch. Commodity costs (food and other dining materials) are expected to be up 1% to 2%, and though labor costs have already begun to moderate (up 11% in the third quarter versus 13% during the first half), mid-single-digit wage expenses will persist into 2020.

Even with that pressure, though, Texas Roadhouse has demonstrated its ability to roll with the punches and remains a favorite chain in America even though competition is fierce. The stock rebounded double digits after this last report but is still flat year to date. With earnings back in growth mode, I don't think the stock will remain pedestrian forever. Shares of this best-in-class restaurant operator remain among my favorites -- no matter which direction the economy heads next.