Shares of Texas Roadhouse (TXRH 1.95%) popped more than 20% on Tuesday after the restaurant chain delivered a sizzling third-quarter performance.
Texas Roadhouse's revenue rose 9.4% year over year to $650.5 million, besting Wall Street's estimates of $648 million. The gains were driven by new restaurant openings and a 4.4% rise in comparable restaurant sales -- including traffic growth of 1.5% -- at company-owned locations. "Our operators continue to execute on our core strategy of getting guests in the door and providing a legendary experience," CEO Kent Taylor said in a press release.
Better still, Texas Roadhouse's profitability improved drastically. Restaurant margin increased 49 basis points to 16.7%, as increased labor productivity helped to offset wage rate inflation. That, in turn, helped operating income leap 26.6% to $44.9 million. And earnings per share -- which were boosted by stock buybacks -- surged 29.1% to $0.52.
Texas Roadhouse's shares spiked after reporting a sharp rise in third-quarter profits. Image source: Getty Images.
Looking ahead
Texas Roadhouse said comp sales trends have remained strong through the first four weeks of the fourth quarter; comps are up 5.3% compared to the year-ago period.
Management also issued a forecast for 2020 that includes an accelerating pace of store openings. "On the development front, our restaurant pipeline is as strong as it has ever been," Taylor said. "In 2020 we are targeting at least 30 company restaurant openings and our franchise partners are targeting an additional eight restaurant openings."
All told, Texas Roadhouse's third-quarter report was a welcome combination of solid current results and a bullish outlook for the coming year. "As we head into 2020, we are excited about the growth opportunities and the strength of our business," Taylor said.
Based on the stock's 20% rise on Tuesday, it seems that investors share Taylor's excitement.
