On Thursday, Goldman Sachs (NYSE:GS) initiated coverage on Brinker International (NYSE:EAT) stock, the parent company of Chili's and Maggiano's restaurants, with a Buy rating and a price target of $150.00. The firm's analysis acknowledges Brinker's dominant revenue stream stemming from Chili's, which accounts for nearly 90% of the company's $4.5 billion annual revenue.
According to InvestingPro, 18 analysts have recently revised their earnings expectations upward, though current valuations suggest the stock is trading slightly above its Fair Value.
Chili's has demonstrated a strong performance, surpassing the broader casual dining industry's same-store sales growth (SSSG) since the second half of the calendar year 2022. This growth has gained momentum over the last two quarters, with revenue growing 8.4% year-over-year, attributed to successful menu and marketing innovations, particularly the Triple Dippers, which have become a core product offering.
Despite Brinker's shares soaring 200% year-to-date, outpacing the S&P 500's 26% gain, Goldman Sachs believes the market has yet to fully recognize the extent of Chili's transformation under new management. The firm anticipates that Chili's will maintain positive traffic, projecting a 1% to 2% increase in fiscal years 2026 and 2027, in contrast to the casual dining industry, which is expected to see low single-digit declines.
The analyst's outlook is more optimistic than the consensus, which predicts Chili's traffic will level off in the coming years. Goldman Sachs expects that the changes in Chili's menu, marketing, and store operations will lead to sustained growth and a long-term advantage for the brand.
In other recent news, Brinker International has made significant stock-based compensation awards to its top executives, according to an SEC filing.
CEO and President Kevin Hochman received performance shares with a target value of $20 million, while other executives also received substantial awards. The shares are based on the company's Total (EPA:TTEF) Shareholder Return (TSR) relative to peers in the S&P 1500 Hotels, Restaurants and Leisure Index.
In recent developments, Brinker International has seen positive analyst activity following strong Q1 results. Piper Sandler raised its stock target for Brinker by over 55%, maintaining a neutral rating, following a 14.1% increase in same-store sales. Stifel also increased its price target on Brinker shares while maintaining a buy rating, highlighting the company's sales momentum.
KeyBanc Capital Markets adjusted its price target for Brinker to $115, retaining an overweight rating, following Brinker's first-quarter results that surpassed consensus estimates for earnings per share, EBITDA, and same-store sales growth.
Evercore ISI increased its price target for Brinker to $110, maintaining an in line rating, following a reassessment of Brinker's first-quarter results.
BMO Capital Markets adjusted its stance on Brinker International, shifting its rating from outperform to market perform, while increasing its price target for the company's shares from $80.00 to $105.00. Similarly, JPMorgan (NYSE:JPM) shifted from an overweight to a neutral rating, while notably increasing the price target to $100. These recent developments reflect Brinker's confidence in its growth trajectory and its commitment to operational efficiency.
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