EPS came in at $0.22 versus $0.23 consensus.  The top-line numbers, as we expected were strong, but margins were weaker-than-expected and guidance for full-year EPS growth was as margin pressures were brought to bear on the company’s P&L.  As we wrote this afternoon, there are other companies that we would prefer on the long side in casual dining, particularly given what we view as a lofty multiple for what TXRH offers investors.


Below is our Top Ten Takeaways from the quarter:

  1. The company’s top-line is healthy.  Two-year average trends accelerated sequentially in the second quarter and accelerated in July versus the 2Q number also.  For the first four weeks of the third quarter, comps were reported as +3.9%.
  2. Following a (average system) price increase of 1% in March, a further 1% (average) price increase has been taken to bring the store base up to 2% pricing on the menu.  Despite this, traffic has remained strong and the comp overall, as pointed out above, seems to be improving through July.
  3. Later this month, the company will test an additional price increase of just over 2% at 19 locations.  If successful, the hike could be rolled out system-wide next year if food costs remain at elevated levels.
  4. Despite this impressive top-line performance the comp growth has not been sufficient to offset the significant margin pressure brought on by commodity and labor costs.
  5. The company expects continuing deleveraging on the labor line due to new restaurant labor costs and higher investment in labor hours.
  6. The primary items that boosted the company’s cost of sales were proteins, cooking oil, butter, potatoes.
  7. The company anticipates increased inflationary costs, particularly around proteins, in 2012.
  8. New unit growth is set to accelerate in 2012 with 25% growth in unit openings versus the projected 20 company restaurant openings in 2011.
  9. This stock was priced for near perfection with a lofty EV/EBITDA multiple and, upon not delivering just that, is selling off sharply post-market.  We do not expect this to be the last stock to do so this earnings season.
  10. Sell-side sentiment is certainly not bearish with zero sells on the stock and ~60% of analysts rating it a “Buy”.  There is plenty of room for sentiment to swing.

TXRH: (NARROW) MISS AND LOWER - txrh sell side sentment



Howard Penney

Managing Director


Rory Green


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more