EAT STILL GOING STRONG AFTER THREE YEARS

This note was originally published February 28, 2013 at 11:19 in Restaurants

Our bullish stance on Brinker (EAT) remains firmly in place as the Investor & Analyst Conference was starkly different in tone to the unsettling Darden Analyst Meeting the couple of days prior.  Here are our summary thoughts on EAT:

 

  • Consistent with other industry players, Brinker said that Chili’s quarter-to-date same-restaurant sales are down 2-3%.  This implies industry sales are down more than -3.5% if the Gap-to-Knapp this quarter has remained constant versus that of 2QFY13. 
  • EAT guided FY 2013 to the low end of its prior guidance for EPS of $2.30-$2.45 but in line with consensus expectations.
  • The strong margin trends are insulating the company’s earnings from the current top line softness
  • Brinker indicated that it could meet its long standing $2.75-$2.80 EPS target in FY 2014, a year earlier than the initial goal that was set back in 2010.
  • Brinker's disclosed goal to double EPS again to $4 per share by FY 2017, driven by familiarity, variability and the continued benefit of new technology.
  • To reach that goal the company will drive 3-4% revenue growth and 10-15% EPS growth.
  • EPS will also benefit from the share repurchases are expected to exceed $1 billion over the next five years or 40% of the market cap of the company.
  • The company highlighted a diversified business model comprising of Chili’s and Maggiano’s, franchising royalty streams and the 2nd largest casual dining company in the world.
  • Management has earned the respect of Wall Street delivering 330bps of a targeted 400bps improvement in Chili's stet back in 2010.
  • EAT remains of the best run companies in the restaurant industry and a LONG on the Restaurant Position Monitor.

 

Conclusion

 

We believe that Brinker is well poised to deliver on its stated goals and remains one of our favorite names in the restaurant space.  The company is offering investors a differentiated focus on returns with a clear capital allocation strategy.  EAT is one of our favorite names in the restaurant space, even after this past three years.

 

 

EAT STILL GOING STRONG AFTER THREE YEARS - chili s pod 1

 

 

 


Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

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