Here's Why Brinker International Stock Sank Today
Shares of restaurant company Brinker International (NYSE: EAT) -- parent of Chili's and Maggiano's Little Italy -- sank on Wednesday after it reported financial results for its fiscal fourth quarter of 2024. As of noon ET today, Brinker stock was down about 13%.
Down on good results
Brinker's fourth quarter ended in late June, and traffic to its restaurants during that period was surprisingly strong. A near 6% year-over-year jump coupled with price increases led to fourth-quarter same-store sales growth of 13.5%. This helped lift full-year revenue to $4.4 billion, up nearly 7% from its fiscal 2023.
On an adjusted basis, full-year diluted earnings per share (EPS) of $4.10 were lower than what analysts had expected. Moreover, management expects adjusted diluted EPS of $4.75, at most, in fiscal 2025, which is also lower than expectations.
Missing expectations is resulting in a lower stock price today for Brinker, even though the numbers were good by almost any metric.
What now?
It's important to note that, going into the fourth-quarter report, Brinker stock was already up roughly 60% year to date, which was well ahead of the S&P 500. At the end of the day, this is a modestly growing, more mature business.
In other words, one wouldn't expect such strong gains for the stock. Therefore, it's not surprising to see it cool off a bit today in light of its recent run-up.
As of this writing, Brinker stock trades at about 13 times its forward adjusted profit expectations. I believe that's reasonable. If the company can continue stimulating stronger restaurant traffic, then this stock could find more upside in coming quarters and years. But investors should be aware that it won't always enjoy higher revenue from charging higher menu prices, like it did in fiscal 2024.
Should you invest $1,000 in Brinker International right now?
Before you buy stock in Brinker International, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Brinker International wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $711,657!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 12, 2024
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Here's Why Brinker International Stock Sank Today was originally published by The Motley Fool