Shares of restaurant company Brinker International (EAT -3.38%) -- 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.
