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On Friday, Stifel analysts updated their stance on Texas Roadhouse stock (NASDAQ:TXRH), increasing the price target from $170.00 to $180.00, while still holding a "Hold" rating on the shares. The $12.1 billion restaurant chain, which according to InvestingPro maintains a "GREAT" financial health score, saw its stock trading near its Fair Value. The adjustment comes in the wake of the company’s first-quarter earnings report, which presented a mixed financial picture.
Texas Roadhouse’s comparable store sales (comps) rose by 3.5% in the first quarter, surpassing both Stifel’s projection of 2.0% and the broader market expectation of 3.0%. The company achieved impressive revenue growth of 15.1% over the last twelve months, though its gross profit margin remains modest at 18.6%. However, earnings per share (EPS) for the quarter fell short of the consensus estimate, coming in at $1.70 compared to the expected $1.76. The shortfall was primarily attributed to restaurant operating margin (ROM) compression.
Despite the lower-than-anticipated EPS, Stifel noted satisfaction with Texas Roadhouse’s performance, considering the erratic sales trends observed during the quarter. The company saw an uptick in sales momentum in March, which continued into April, even with the Easter holiday shift posing a challenge. InvestingPro data reveals the company has maintained dividend payments for 15 consecutive years, with a current yield of 1.58%.
Texas Roadhouse has reaffirmed most of its financial guidance for the fiscal year 2025 but has adjusted its commodity inflation forecast to 4%, up from the previous 3-4% range. This revision reflects the anticipated increase in beef costs for the remainder of the year and the expected impact of tariffs, which could contribute approximately 30 basis points.
In light of the first-quarter results and the stronger sales momentum anticipated in the second quarter, Stifel has revised its full-year EPS estimate upwards. However, the firm maintains a cautious stance with its "Hold" rating on Texas Roadhouse stock, suggesting that the current market valuation adequately reflects the balance of potential risks and rewards.
In other recent news, Texas Roadhouse reported a mixed first-quarter performance for 2025. The company’s earnings per share (EPS) were $1.70, falling short of the anticipated $1.80, while revenue reached $1.45 billion, aligning with expectations. Evercore ISI upgraded its price target for Texas Roadhouse from $185 to $190, maintaining an Outperform rating, citing strong recovery in sales and customer traffic. The restaurant chain saw a 9.6% increase in revenue and a 3.5% rise in same-store sales, with traffic growth of 1.1%. However, increased wage and commodity inflation, particularly in beef, are expected to pressure margins, with a slight reduction in the 2025 restaurant margin forecast to 16.2%. Evercore ISI anticipates an EPS of $7.38 for 2026, although this is below the consensus estimate of $7.66. The firm also noted the potential for margin expansion if Texas Roadhouse achieves a 17.5% margin, which could imply an EPS of $8.60. Despite challenges, the company has managed to accelerate traffic growth without relying on value promotions or new menu advertisements.
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