Brinker International (EAT): Ready To Pull Ahead Of The Pack - Wells Fargo
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Wells Fargo analyst, Jeff Farmer, reiterated his Market Perform rating on shares of Brinker Int'l (NYSE: EAT) but after six quarters of market share losses, he now expects Chili’s SSS gap, relative to the industry, to reverse course in F1Q17. The analyst believes the company will continue down that path throughout FY17, which should keep the shares trading at a premium to peers.
EAT is scheduled to report F1Q17 earnings on 10/25 (BMO). The analyst is modeling EPS of $0.53 (-6% yr/yr), below the Street estimate of $0.55 and driven by a 0.2% same-store sales (SSS) decline at Chili’s, 60bps of store-level margin compression and a 60bps up-tick in G&A spending yr/yr.
The analyst expects investors to focus on
1) Chili’s SSS balanced against management’s confidence in outperforming peers. Casual dining SSS trends slowed materially throughout the quarter (down 1.3%, the weakest performance since F3Q14)
2) the impact of recent initiatives on SSS (i.e., ‘3 for Me’, expanded bar taps, increased media spend)
3) FY17 EPS guidance ($3.40-$3.50 now and expect it to be reiterated).
No change to the valuation range of $49 - $51.
Shares of Brinker Int'l closed at $50.77 yesterday.
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