Core Insights - The article emphasizes the importance of quantitative research, financial modeling, and risk management in identifying high-growth investment opportunities [1] Group 1: Expertise and Experience - The analyst has over 20 years of experience in equity valuation, market trends, and portfolio optimization [1] - Previous role as Vice President at Barclays involved leading teams in model validation, stress testing, and regulatory finance [1] - The investment approach combines risk management with long-term value creation [1] Group 2: Analytical Focus - The analyst specializes in fundamental and technical analysis, leveraging data-driven insights to assess market dynamics [1] - There is a keen interest in macroeconomic trends, corporate earnings, and financial statement analysis [1]

Group 1 - The quick-service fast food industry is viewed as a potential safe haven during economic downturns and high inflation due to local sourcing of ingredients, which may mitigate the impact of tariffs [1] - Observing megatrends can provide insights into societal advancements and investment opportunities, although identifying these trends can be challenging [1] - The importance of fundamentals, quality of leadership, and product pipeline is emphasized for uncovering investment opportunities, alongside an interest in macrotrends and emerging technologies [1] Group 2 - The focus has been on marketing and business strategy for medium-sized companies and startups, with experience in evaluating startups and emerging industries/technologies [1] - The integration of personal interests in megatrends and technological developments with a strong emphasis on fundamentals and technical analysis is highlighted as crucial for investment decisions [1]

Core Viewpoint - Brinker International's stock price fell nearly 17% over the past week due to a quarterly earnings report that did not meet investor expectations, compounded by several analyst price target cuts [1][6]. Financial Performance - For the fiscal third quarter of 2025, Brinker reported revenue of just under $1.43 billion, marking a 27% year-over-year increase and surpassing the average analyst estimate of $1.37 billion [2]. - The company's GAAP net income more than doubled to $119 million, while non-GAAP adjusted earnings per share rose to $2.66 from $1.24, exceeding the consensus projection of $2.49 [4]. Market Sentiment - Investors are concerned about the impact of the current trade war on the U.S. economy, particularly regarding nonessential spending like restaurant meals, which are often the first to be cut from household budgets during economic tightening [5]. - Analysts from Wells Fargo and Barclays have reduced their price targets for Brinker, with Wells Fargo lowering its target to $150 from $165 and Barclays to $155 from $165, while both maintained hold recommendations [6]. Growth Potential - Despite current market concerns, Brinker has demonstrated impressive growth in a challenging restaurant industry, suggesting that it has the potential to survive and thrive during economic downturns [7].

Core Insights - Brinker International, Inc. (EAT) reported strong third-quarter fiscal 2025 results, with earnings and revenues exceeding expectations, driven by solid fundamentals and increased traffic [1][3][12] - Despite robust performance, the company's shares fell by 14.8% due to economic uncertainty and potential impacts from tariffs on imported goods [2] Financial Performance - Adjusted earnings per share (EPS) for the quarter were $2.66, surpassing the Zacks Consensus Estimate of $2.48, compared to $1.24 in the prior-year quarter [3] - Total revenues reached $1,425.1 million, exceeding the consensus mark of $1,379 million, marking a 27.2% year-over-year increase [3] Segment Performance Chili's - Chili's segment revenues increased by 30.5% year over year to $1.30 billion, supported by favorable comparable restaurant sales and higher traffic [4] - Company-owned traffic for Chili's rose by 20.9% year over year, with comparable sales increasing by 31.6% [5][6] Maggiano's - Maggiano's sales grew by 0.2% year over year to $121 million, driven by increased menu pricing, although traffic fell by 8.2% [7][8] - Comparable sales in Maggiano's rose by 0.4% year over year, below expectations [7] Operating Results - Total operating costs and expenses were $1.27 billion, up from $1.05 billion in the prior year, with an adjusted restaurant operating margin of 18.9%, an increase from 14.2% [10] - Adjusted EBITDA for the quarter was $220.6 million, up from $122.4 million in the prior-year quarter [10] Balance Sheet - As of March 26, 2025, cash and cash equivalents were $17.5 million, up from $15.5 million a year earlier, while long-term debt decreased to $518.3 million from $786.3 million [11] Guidance - For fiscal 2025, management raised revenue expectations to $5.33-$5.35 billion from $5.15-$5.25 billion, and EPS guidance was increased to $8.5-$8.75 from $7.5-$8 [12]

Q3 F25 April 29, 2025 SAFE HARBOR STATEMENT $898 $917 $988 $1,073 $1,019 $1,197 $1,292 Q1 Q2 Q3 Q4 Chili's Company Sales F24 F25 $104 $147 $121 $124 $108 $149 $121 Q1 Q2 Q3 Q4 Maggiano's Company Sales F24 F25 During these presentations, and in response to your questions, certain items may be discussed which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Any forw ...

Restaurant Operations - As of March 26, 2025, the company owned, operated, or franchised a total of 1,626 restaurants, including 1,163 company-owned and 463 franchised locations[70]. - The company opened 27 new franchise restaurants during the thirty-nine week period ended March 26, 2025, and plans to pursue international expansion through development agreements[76]. - The company acquired land and buildings valued at $11.1 million associated with four company-owned restaurants during the third quarter of fiscal 2025[78]. Financial Performance - Total revenues for the thirteen-week period ended March 26, 2025, increased to $1,425.1 million, up from $1,120.3 million for the same period in 2024, representing a growth of approximately 27.1%[80]. - Total revenues for the Chili's segment increased by 30.5% to $1,304.1 million, driven by favorable comparable restaurant sales and higher traffic[94]. - Chili's total revenues increased by 25.0% to $3,543.3 million for the thirty-nine week period ended March 26, 2025, compared to $2,834.9 million for the same period in 2024[97]. - Maggiano's total revenues increased by 1.9% to $379.0 million for the thirty-nine week period ended March 26, 2025, compared to $372.0 million in 2024[104]. Comparable Sales and Traffic - Comparable restaurant sales for company-owned restaurants increased by 28.2% in the thirteen-week period ended March 26, 2025, driven by a 17.7% increase in traffic[81]. - Franchise revenues rose due to higher royalties, with Chili's franchisees generating sales of approximately $237.4 million in the thirteen-week period ended March 26, 2025, compared to $216.2 million in the same period of 2024[80]. Cost Management - Food and beverage costs for the thirteen-week period ended March 26, 2025, were $353.1 million, representing 25.0% of company sales, a favorable variance of 0.1% compared to the previous year[82]. - Restaurant labor costs increased to $452.2 million, accounting for 32.0% of company sales, with a 1.4% favorable variance driven by sales leverage[82]. - Chili's food and beverage costs were $324.5 million, 25.1% of company sales, with a favorable variance of 0.1% attributed to menu pricing[95]. - Chili's food and beverage costs were favorable by 0.2%, with menu pricing contributing 1.4%, offset by unfavorable commodity costs primarily driven by poultry and produce[100]. - Restaurant labor costs for Chili's were favorable by 1.8%, attributed to sales leverage and lower other labor expenses, despite higher hourly labor costs[100]. - Maggiano's food and beverage costs were favorable by 0.5%, driven by menu pricing, despite unfavorable commodity costs primarily from dairy and poultry[105]. Expenses - General and administrative expenses rose by $12.2 million to $58.3 million, primarily due to corporate technology initiatives and stock-based compensation[85]. - General and administrative expenses for Chili's rose by $5.7 million to $36.7 million for the thirty-nine week period ended March 26, 2025, compared to $31.0 million in 2024[101]. - Depreciation and amortization for the thirty-nine-week period ended March 26, 2025, increased by $22.9 million to $148.7 million, primarily due to additions for new and existing restaurant assets[88]. - Chili's depreciation and amortization increased by $22.9 million, totaling $131.2 million for the thirty-nine week period ended March 26, 2025, up from $108.3 million in the prior year[99]. Cash Flow and Financing - Chili's net cash provided by operating activities increased by $212.6 million to $493.0 million for the thirty-nine week period ended March 26, 2025, compared to $280.4 million in 2024[106]. - Net cash used in investing activities increased by $47.4 million to $(185.4) million for the thirty-nine week period ended March 26, 2025, primarily due to increased spending on equipment and capital maintenance[107]. - Net cash used in financing activities increased by $212.7 million, from $(142.0) million in fiscal 2024 to $(354.7) million in fiscal 2025, primarily due to increased net repayments of long-term debt and share repurchase activity[108]. - The company refinanced $350.0 million of 5.000% notes through its existing revolving credit facility and drew net borrowings of $90.0 million during the thirty-nine week period ended March 26, 2025[109]. - As of March 26, 2025, the company had $810.0 million available under its $900.0 million revolving credit facility, which matures on August 18, 2026, with an interest rate of 5.93%[110]. - The company repurchased 1.2 million shares for $86.3 million during the thirty-nine week period ended March 26, 2025, with approximately $107.0 million remaining under the current share repurchase program[114]. - The company expects its current cash and cash equivalents, along with cash generated from operations and availability under the revolving credit facility, to meet capital expenditure and working capital needs for at least the next twelve months[115]. Tax and Interest - The effective income tax rate for the thirteen-week period ended March 26, 2025, was 17.2%, up from 9.6% in the previous year, primarily due to higher income before income taxes[91]. - Interest expenses decreased by $3.0 million to $13.2 million for the thirteen-week period, mainly due to lower average outstanding debt balances[85]. - A hypothetical 100 basis point increase in the current interest rate on the outstanding balance of the revolving credit facility would result in an additional $0.9 million of annual interest expense[118]. Risks - The company faces commodity price risk due to fluctuations in market prices for food and other commodities, which could negatively affect short-term financial results if costs cannot be passed on to customers[119].

Financial Data and Key Metrics Changes - For Q3 2025, Brinker reported total revenues of $1.425 billion with consolidated comp sales growth of 28.2% [19] - Adjusted diluted EPS for the quarter was $2.66, up from $1.24 in the previous year [20] - Restaurant operating margins improved to 18.9%, a 470 basis points increase year over year [21] Business Line Data and Key Metrics Changes - Chili's reported same restaurant sales growth of 31.6%, driven by a 20.9% increase in traffic, a 6.3% positive mix, and a 4.4% price increase [20] - Maggiano's reported comp sales growth of 0.4%, driven by a 7.3% price increase and a 1.3% positive mix, but offset by an 8.2% decline in traffic [21] Market Data and Key Metrics Changes - Chili's sales performance significantly outpaced the industry despite no new food or value news, indicating strong operational performance [6] - The company noted that consumer sentiment remains cautious, impacting overall restaurant traffic across the industry [18] Company Strategy and Development Direction - The company is focused on improving the fundamentals of food, service, and atmosphere to sustain growth and market share [31] - Chili's is launching new menu items and marketing campaigns to enhance brand value and customer experience, including the Big QP burger [10][11] - Maggiano's is following a similar turnaround strategy as Chili's, focusing on menu simplification and eliminating unprofitable discounting [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining positive same-store sales growth despite upcoming tougher comparisons [30] - The company is optimistic about its ability to maintain or grow restaurant-level margins through strategic investments and improved productivity [48] Other Important Information - Capital expenditures for the quarter were approximately $80 million, driven by investments in kitchen equipment and maintenance [25] - The company repaid $125 million in funded debt, leaving a remaining balance of $90 million on its revolver [25] Q&A Session Summary Question: Concerns about sustainability of same-store sales growth - Management acknowledged the challenges of maintaining growth but emphasized their focus on improving fundamentals to drive continued success [31] Question: Notable contributors to recent momentum - Management noted that traffic remains strong year over year, with no significant slowdown observed [38] Question: Clarification on traffic trends - Management confirmed that traffic trends in April were similar to Q3, indicating sustained momentum [42] Question: Impact of tariffs on cost of sales - Management indicated that over 80% of their supply chain is sourced domestically, minimizing tariff impacts [56] Question: Future menu upgrades - Management highlighted upcoming upgrades to the rib platform and nachos, aiming to enhance customer experience and drive sales [62] Question: Capacity improvements and constraints - Management is learning from high-performing restaurants to improve capacity and traffic handling across the system [120]

Core Viewpoint - Brinker International, the parent company of Chili's, reported strong growth in the third quarter, but the stock price fell significantly due to high investor expectations and concerns about a potential recession from trade wars [1][2]. Financial Performance - Comparable sales at Chili's increased by 31%, with traffic growth of 21%, attributed to effective marketing strategies [3]. - Revenue rose by 27.2% to $1.43 billion, surpassing the consensus estimate of $1.39 billion [4]. - Operating income more than doubled to $156.9 million, and adjusted earnings per share increased from $1.24 to $2.66, exceeding estimates of $2.57 [4]. Guidance and Market Reaction - The company raised its full-year revenue guidance to $5.33 billion-$5.35 billion, up from $5.15 billion-$5.25 billion, and above the consensus of $5.25 billion [4]. - Adjusted EPS guidance was lifted to $8.50-$8.75, an increase from the previous range of $7.50-$8.00, leading to a forward P/E of around 16 [5]. - Despite the positive adjustments, investor skepticism remains regarding the company's ability to sustain its growth momentum [5]. Demand Outlook - Chili's appears to have tapped into a new level of demand, which is expected to persist in the future [6].

Brinker International (EAT) Q3 2025 Earnings Call April 29, 2025 10:00 AM ET Company Participants Kim Sanders - Vice President of Investor & Government RelationsKevin Hochman - CEO & PresidentMika Ware - Executive VP & Chief Financial OfficerDavid Palmer - Senior Managing DirectorDennis Geiger - Executive Director - Equity ResearchChris O'cull - Managing DirectorJeff farmer - Managing DirectorChristine Cho - Vice PresidentJon Tower - Director & Equity Research - Consumer & RestaurantsBrian Vaccaro - Managin ...

Core Insights - Brinker International reported quarterly earnings of $2.66 per share, exceeding the Zacks Consensus Estimate of $2.48 per share, and significantly up from $1.24 per share a year ago [1] - The company achieved revenues of $1.43 billion for the quarter, surpassing the Zacks Consensus Estimate by 3.35% and up from $1.12 billion year-over-year [3] Earnings Performance - The earnings surprise for the quarter was 7.26%, and the company has surpassed consensus EPS estimates three out of the last four quarters [2] - In the previous quarter, Brinker International reported earnings of $2.80 per share against an expectation of $1.80, resulting in a surprise of 55.56% [2] Stock Performance - Brinker International shares have increased approximately 21.5% since the beginning of the year, contrasting with a -6% decline in the S&P 500 [4] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [7] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $2.12 on revenues of $1.35 billion, and for the current fiscal year, it is $8.38 on revenues of $5.24 billion [8] - The estimate revisions trend for Brinker International is mixed, which may change following the recent earnings report [7] Industry Context - The Retail - Restaurants industry is currently ranked in the bottom 19% of over 250 Zacks industries, suggesting potential challenges for stocks within this sector [9] - Another company in the same industry, FAT Brands Inc., is expected to report a quarterly loss of $2.40 per share, indicating a year-over-year change of -1.3% [10]