Keith bought Brinker in the Hedgeye Virtual Portfolio yesterday at $24.92.
Brinker remains one of my favorite intermediate-term ideas in the restaurant space. I began getting vocal about the name in April 2010, stating that the name had some volatile quarters ahead, but that FY11 would bring improved performance. That scenario is largely playing out as top-line trends stabilize and margin gains are achieved by management. I would expect continued improvement in margins in 2H11 and, as I wrote on 3/24, earnings has the potential to reach $1.90-$2.00 per share in fiscal 2012.
Given current sales trends, I also believe that the current consensus estimates for 3Q11 and 4Q11 are low by $0.02 per quarter.
Besides the improving fundamentals, the steep drop in the company’s share count is also going to support EPS growth over the next few quarters.
Howard Penney
Managing Director
