On Friday, RBC Capital Markets adjusted their valuation of Texas Roadhouse shares (NASDAQ:TXRH), increasing the price target to $165 from $145 while maintaining a Sector Perform rating on the stock.
The price target revision comes after the company reported first-quarter earnings that aligned with revenue expectations and revealed a 6% earnings before interest, taxes, depreciation, and amortization (EBITDA) outperformance compared to consensus.
The restaurant chain's profitability was notably high in the quarter, reaching 17.4%, which was attributed to stronger comparable store sales (comps) and lower-than-anticipated inflation effects.
Despite a slight decrease in quarterly-to-date comps to 9.3% from 10.2% in March, these figures still surpassed the market expectation of 6.8%. Importantly, there are currently no signs of a slowdown in consumer spending according to the company's observations.
Looking ahead, Texas Roadhouse anticipates commodity inflation to escalate throughout the year, which is projected to lead to a 3% increase in prices for the fiscal year 2024, with the most significant impact expected in the second half of the year. In response to these developments, RBC Capital has revised their earnings estimates upward in conjunction with the new price target.
The update follows Texas Roadhouse's performance in the first quarter, where the company managed to navigate economic challenges effectively. The increased stock price target reflects confidence in the company's continued ability to maintain profitability and manage inflationary pressures while still achieving strong sales growth.
InvestingPro Insights
As Texas Roadhouse (NASDAQ:TXRH) garners attention with its solid first-quarter performance and RBC Capital Markets' revised price target, investors may find additional context from real-time data and insights.
According to InvestingPro, Texas Roadhouse boasts a robust market capitalization of $10.5 billion, underscoring its significant presence in the restaurant industry. The company's revenue growth has been impressive, with a 13.73% increase over the last twelve months as of Q1 2024, reflecting its ability to expand amidst economic fluctuations.
InvestingPro Tips highlight Texas Roadhouse's commitment to shareholder returns, noting that the company has raised its dividend for 3 consecutive years and maintained dividend payments for 14 consecutive years. This consistent dividend history may be particularly appealing to income-focused investors. Moreover, the company's P/E ratio stands at 34.57, which, while indicating a high earnings multiple, also suggests investor confidence in its future growth potential.
For investors considering a deeper dive into Texas Roadhouse's financial health and future prospects, InvestingPro offers more tips, including insights on earnings revisions, valuation multiples, and profitability metrics. With 8 analysts having revised their earnings upwards for the upcoming period, it reflects a positive outlook on the company's performance. For those interested in these comprehensive analyses, there are additional tips available on InvestingPro. To enrich your investment strategy with these insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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