On Monday, Piper Sandler adjusted its price target on shares of Brinker International (NYSE:NYSE:EAT), operator of the Chili's Grill & Bar chain, to $97 from $62, while keeping a Neutral rating on the stock. The revision follows Brinker International's announcement of its first-quarter fiscal year 2025 results earlier in the week, which highlighted a robust performance from its Chili's brand.
The company reported a significant 14.1% increase in same-store sales (SSS) for Chili's, surpassing the consensus estimate of 10.5%. The impressive sales growth translated into a strong profit margin, with restaurant-level margins (RLMs) expanding by 305 basis points year-over-year and beating consensus by approximately 140 basis points. The positive financial outcomes were attributed to both a strong top-line and effective cost management, resulting in solid profit flow-through of around 38%.
During the earnings call, Brinker International's management noted that quarter-to-date same-store sales at Chili's were continuing to show double-digit percentage increases, which was well ahead of the pre-earnings consensus forecast of 6.5% for the second quarter of fiscal year 2025. The company also reported that customer traffic was on the rise.
The analyst from Piper Sandler remarked on the impressive turnaround at Chili's, which not only has become well-established but also appears to be gaining further momentum. Reflecting the strong quarterly performance and positive outlook, Brinker International raised its adjusted earnings per share (EPS) guidance for fiscal year 2025. Following these developments, consensus estimates for the company's earnings have also been adjusted upward.
InvestingPro Insights
Brinker International's recent performance aligns with several key insights from InvestingPro. The company's stock has shown remarkable strength, with a 197.39% price total return over the past year and a 90.83% return in the last six months. This robust performance is reflected in an InvestingPro Tip noting that the stock is trading near its 52-week high, with the current price at 97.92% of that peak.
The company's financial health appears solid, with an adjusted P/E ratio of 20.74 for the last twelve months as of Q1 2025, and a PEG ratio of 0.78, suggesting the stock may be undervalued relative to its growth prospects. This is further supported by an InvestingPro Tip indicating that Brinker is trading at a low P/E ratio relative to its near-term earnings growth.
However, investors should note that the stock's RSI suggests it may be in overbought territory, which could warrant caution. Additionally, while Brinker has shown strong profitability over the last twelve months, it faces challenges with weak gross profit margins, as highlighted by another InvestingPro Tip.
For those seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Brinker International, providing deeper insights into the company's financial position and market performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.