DALLAS — Shares of Brinker International, Inc. (NYSE: EAT) surged approximately 6% in late-morning trading on Wednesday, reaching $234.58, as investors focused on a robust fiscal 2027 outlook despite a slight quarterly earnings miss.
The company reported fourth-quarter adjusted earnings per share of $3.07, which fell short of the consensus estimate of $3.09 by two cents. However, the market reaction centered on management's confident guidance for the upcoming fiscal year, which exceeded analyst expectations at the midpoint.
Chili's Continues Its Winning Streak
Chili's, Brinker's flagship chain, posted a 5.6% increase in comparable sales, marking its fifth consecutive year of same-store sales growth. This performance came against a more challenging comparison base, underscoring the brand's enduring appeal.
CEO Kevin Hochman attributed the success to "strong brand relevance, industry-leading value proposition, streamlined operations, and significant restaurant investments," which he said have created a competitive moat.
Fiscal 2027 Guidance
For fiscal 2027, Brinker projected adjusted earnings in the range of $12.60 to $13.40 per share, with a midpoint of $13.00. This represents a 3.4% premium over the previous analyst consensus of $12.57. Revenue guidance was set at $6.15 billion to $6.27 billion, with a midpoint of $6.21 billion, slightly above the $6.15 billion consensus.
Financial Highlights
In the fourth quarter, total revenue rose approximately 5% to $1.54 billion, while net income jumped 22.5% to $131.1 million. Diluted EPS increased 30% to $2.99, and adjusted EPS grew 23.3% to $3.07.
The company's operating leverage was evident, as net income grew at four times the pace of revenue, benefiting from higher restaurant traffic that spread fixed costs over a larger sales base.
Mixed Brand Performance
While Chili's drove gains, Maggiano's continued to underperform, with comparable sales declining 2.5%. Consolidated comparable sales rose 5%, but the persistent weakness at Maggiano's remains a concern, leaving Brinker's investment thesis heavily reliant on Chili's.
Analyst Reactions and Valuation
Following the earnings release, shares traded at a 16.1% premium to the average analyst price target of $202, according to data compiled by Investing.com. UBS, the only firm with a current target, set it at $260, well above the trading price. Other recent ratings include Wells Fargo (Buy, $220), KeyBanc (Buy, $204), and Stephens (Buy, $200).
The stock has risen past most existing price targets, suggesting that analysts may need to revise their estimates upward if Chili's momentum continues.
Risks and Outlook
Investors should remain cautious about consumer spending power, which could be impacted by economic headwinds. Rising food and labor costs also pose a threat to margins. Additionally, Maggiano's ongoing decline may require increased investment before any sales improvement materializes.
For the stock to sustain its upward trajectory, Chili's must convert its five-year sales streak into adjusted EPS of at least $13.00, aligning with the midpoint of the company's guidance. The market will be watching closely to see if analysts update their models accordingly.
