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Why Brinker International Stock Jumped 14.5% on Wednesday

By Anders Bylund – Aug 12, 2020 at 4:02PM

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The company behind Chili's and Maggiano's Little Italy posted reasonable fourth-quarter results and fairly bullish next-quarter guidance this morning.

What happened

Restaurant chain owner Brinker International (EAT -2.54%) reported solid fourth-quarter results early Wednesday morning, sending the stock sharply higher. Brinker's shares closed the trading session 14.5% higher.

So what

Brinker's fourth-quarter sales fell 32% year over year to $563 million. The bottom line swung from earnings of $1.36 per share to a net loss of $0.88 per share. It was a mixed performance in comparison to Wall Street's expectations. Your average analyst had been looking for a net loss near $1.43 per share on sales in the neighborhood of $574 million.

Looking ahead, the parent company behind Chili's and Maggiano's Little Italy set its bottom-line target for the first quarter at a net loss of approximately $0.32 per share with comparable restaurant sales (comps) falling by "low to mid-teens" percentages against the year-ago period. The current analyst consensus called for larger losses of roughly $0.60 per share.

A door sign inviting guests to an open and bustling restaurant.

Image source: Getty Images.

Now what

Brinker's results will continue to depend on the COVID-19 health crisis for the next several quarters.

"The biggest concern we have, and the country has, is where does the virus go? And obviously, we've seen things spike and then get back under control and that's going to be the big determinant of our results in the short term," said CEO Wyman Roberts in the earnings call. "If we start to see things spike, then we're going to see consumers react and pull back a little bit."

The company is learning some new tricks during the pandemic, and Roberts hopes that the expanded take-out and delivery options will have lasting benefits in the post-COVID era. Until then, he'll settle for controlling the business losses with fingers crossed for a quick return to normal operations.

The stock has bounced back dramatically from the market bottom in March, posting a 390% gain in five months. Even so, Brinker still trades 27% below its 52-week highs, and more than 20% of the company's outstanding shares are sold short. There's plenty of room for dramatic moves either up or down from this point. I'll just grab some breadsticks and watch this drama from the sidelines for a while.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Brinker International, Inc. Stock Quote
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