Citi cuts Brinker Int'l price target to $170, keeps neutral rating

On Thursday, Citi analysts, led by Jon Tower, adjusted the price target for Brinker International (NYSE:EAT) shares, bringing it down to $170.00 from the previous target of $185.00. The firm maintained a Neutral rating on the stock. The revision was influenced by recent market volatility and uncertainty, which have overshadowed the company's potential for another quarter of significant top-line growth, a rarity in the mature casual dining restaurant (CDR) space excluding the COVID-19 period. According to InvestingPro data, the stock has shown considerable volatility with a beta of 2.21, while maintaining strong momentum with a 77% gain over the past six months. Current analysis suggests the stock is trading above its Fair Value.

Brinker International, which owns Chili's and other restaurant brands, is expected to continue its growth trajectory. Analysts at Citi highlighted that the company is well-prepared with marketing strategies to promote new products and value, particularly in the fourth fiscal quarter with a focus on items like a new chicken sandwich. This approach is anticipated to help Chili's drive further market share gains and outperform relative to the sector, even as consumers face a choppy economic environment. InvestingPro data reveals impressive revenue growth of 13.7% in the last twelve months, with analysts forecasting continued net income growth. Get access to 10+ additional ProTips and comprehensive analysis in the Pro Research Report.

The confidence in Brinker's near-term comparative strength is tempered by longer-term considerations. Historically, value creation in the casual dining category has been driven by the growth of new stores. Citi's analysts pointed out that without this expansion, it is challenging to justify a sustained premium valuation for Brinker's shares over time.

The comments from Citi reflect a cautious optimism for Brinker International's short-term performance, acknowledging the company's current positioning in the market. However, they also express a conservative stance on the stock's long-term value without the historical driver of new store openings contributing to its growth.

In other recent news, Brinker International received attention as Evercore ISI maintained its In Line rating for the company, setting a price target of $180. The analysts at Evercore ISI are optimistic about Brinker's potential to maintain strong same-store sales (SSS) growth through fiscal year 2026, with estimates suggesting a 14% increase in Chili's SSS for the fourth fiscal quarter of 2025. This optimism is supported by operational improvements and menu updates. Meanwhile, Amrest, a prominent European restaurant operator, reported a 5.1% year-over-year increase in revenues for fiscal year 2024, reaching €2.6 billion. Despite a decline in net profit to €13.5 million, Amrest achieved record EBITDA of €430 million, marking a 14% increase from the previous year, and declared its first-ever dividend of €0.07 per share. The company also opened 109 new restaurants and noted that digital sales have surpassed traditional channels. Looking ahead, Amrest expects mid-single-digit sales growth in 2025 and aims to maintain its EBITDA margin levels. These developments reflect the companies' strategic focus on sustaining growth and adapting to market challenges.

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