On Friday, BMO Capital adjusted its outlook on shares of Texas Roadhouse (NASDAQ: NASDAQ:TXRH), increasing the price target to $145 from the previous $130 while maintaining a Market Perform rating.
The revision follows the company's first-quarter earnings report, which revealed earnings per share (EPS) of $1.69, surpassing the consensus estimate by $0.06. This performance was attributed to stronger-than-expected comparable store sales (comps) and restaurant margins, marking the second consecutive quarter of such positive results.
Texas Roadhouse reported a notable quarterly comparable sales increase of 9.3%, which is ahead of consensus projections. This comes after the company implemented a 2.2% price increase in late March. The restaurant chain has confirmed its financial guidance for 2024, except its food inflation outlook, which has been revised downward to an increase of 3% from the previously anticipated 5%.
BMO Capital's decision to raise the price target is based on an updated earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast for 2024. The firm has also made slight adjustments to its 2025 estimates, mainly due to the shift in inflation expectations.
Despite the positive momentum indicated by Texas Roadhouse's recent performance, BMO Capital suggests that the current stock price may already reflect these favorable conditions, leading to their decision to remain neutral on the stock.
The analyst's commentary sheds light on the rationale behind the price target adjustment, noting that the target increase to $145 is a result of applying their valuation methodology to the 2025 fiscal year. While acknowledging the strong quarterly results and improved inflation outlook, the firm suggests that the market has already taken these factors into account, indicating a cautious stance on the potential for further stock price appreciation.
InvestingPro Insights
In light of BMO Capital's recent price target increase for Texas Roadhouse (NASDAQ: TXRH), the InvestingPro data and tips provide additional context for investors. With a market capitalization of $10.5 billion and a P/E ratio standing at 34.57, Texas Roadhouse is trading at a premium relative to its earnings. Despite this high earnings multiple, the company has demonstrated robust revenue growth over the last twelve months, with an increase of 13.73%, showcasing its ability to expand its financial top-line significantly.
InvestingPro Tips highlight that Texas Roadhouse has been able to maintain its dividend payments for 14 consecutive years, with a notable dividend growth of 32.61% in the last twelve months as of Q1 2024. This consistent dividend performance, coupled with the fact that 8 analysts have revised their earnings upwards for the upcoming period, suggests confidence in the company's financial health and future prospects. However, it is important to note that the company is trading at a high EBITDA valuation multiple, which may be a point of consideration for valuation-focused investors.
For those looking to delve deeper into Texas Roadhouse's financials and future outlook, InvestingPro offers additional tips and metrics. To access these insights and make more informed investment decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 17 additional InvestingPro Tips available that could further guide your investment strategy in Texas Roadhouse.
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