Shares of Chili’s parent Brinker International (EAT -14.18%) were getting sent back to the kitchen today even as the fast-casual chain delivered another quarter of blistering growth.
Despite the strong results, the numbers didn’t seem to be quite good enough to keep up with the high expectations priced into the stock, especially at a time when investors are fearful that a trade war could cause a recession.
As of 11:26 a.m. ET, the stock was down 14% on the news.
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Is the Chili’s boom over?
Brinker continued to post phenomenal results in the third quarter with comparable sales at Chili’s up 31% on 21% growth in traffic, driven in part by a clever marketing campaign comparing Chili’s burger prices favorably with the fast-food industry.
That same-store sales growth drove revenue up 27.2% to $1.43 billion, ahead of the consensus at $1.39 billion. Operating income more than doubled in the quarter to $156.9 million, and adjusted earnings per share jumped from $1.24 to $2.66, beating estimates at $2.57.
CEO Kevin Hochman said, “Our continued progress on the fundamentals of great food, great service in a fun, friendly atmosphere is clearly winning with guests.”
Good, but not good enough
Brinker did raise its full-year guidance, calling for revenue of $5.33 billion-$5.35 billion, up from a previous range of $5.15-$5.25 billion and ahead of the consensus at $5.25 billion, but investors may have been expecting a bigger boost.
It also lifted its adjusted EPS guidance to $8.50-$8.75, up from an earlier range of $7.50-$8.00. At that range, Brinker now trades at a forward P/E of around 16, though investors seem to doubt that the company can maintain its recent momentum.
Still, Chili’s seems to have unlocked a new level of demand, and that’s likely to stay with the company going forward.
Jeremy Bowman 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.
