Free Trial

Brinker International throws a high-volume continuation signal

Brinker International throws a high-volume continuation signal

Key Points

  • Brinker International is growing and optimizing its profits, guiding higher and ready to rally. 
  • Analysts are raising their targets and see this market setting a new multi-year high soon. 
  • The dividend isn't back yet but balance sheet improvements suggest it could be reinstated in F2025. 
  • Five stocks we like better than Darden Restaurants.

Brinker International Inc.'s NYSE: EAT share price is gaining traction after years of wallowing within a trading range. The move sparked by the FQ2/CQ4 earnings report is solid and suggests the recent uptrend will continue. In this case, the continuation signal is trend-following and a reversal. Brinker shares are trending higher within the range and confirm that trend with a high-volume trend-following signal that also breaks the restaurant stock to new highs. 

Because the move is due to solid results, improved guidance and analysts' support, it could result in significant upside in 2024. The magnitude of the trading range and reversal pattern is worth more than $23 or about 105%; projecting those to the breakout point sets a target range of $67 to $92 over the next two to three years. 

Brinker International: Growing and optimizing profits

Brinker International had a solid FQ2/CQ4 with revenue of $1.07 billion, up 4.9% compared to last year. The revenue is as expected but compounded by margin improvement. 

Among the takeaways for potential investors is that revenue is up 23% compared to FQ2 2020, the last comparable quarter before the COVID-19 pandemic, and the share price is relatively flat. The company made revenue gains on traffic and pricing increases, and all three core segments produced mid-single-digit year-over-year (YOY) comps.

The margin news is good. The company widened the operating and restaurant operating margins by nearly 200 basis points despite leaning into increased ad spending. Its move toward simplification is paying off. The GAAP income doubled as a result, and the adjusted grew by 30%, leaving adjusted earnings at 99 cents.

Earnings outpace the MarketBeat.com consensus by over 500 basis points, and strength should continue. The company raised its EPS target to $3.45 to $3.75, a nickel at both ends, putting the analysts' consensus estimate in the range lower half. Guidance may be cautious, given the momentum. 

Analysts lead the market to higher price points

The analysts have the stock pegged at "hold," and the consensus price target is lagging the price action, but the group is leading the market to higher price points. MarketBeat tracks three post-release revisions that amount to a Strong Buy with a price target of $50. The $50 target is nearly 25% above the consensus and still 10% above the recent price action and suggests the rally will continue. 

Brinker International offers some value relative to its peers, but there is a catch. The 12x earnings multiple is low compared to Texas Roadhouse NASDAQ: TXRHDarden Restaurants NYSE: DRI and even Cracker Barrel NASDAQ: CBRL, but there is no yield. The company cut the payment in 2020 to preserve capital during the pandemic and has yet to bring it back. 

The company took on significant debt to help fund its growth and is running a shareholder deficit, so it may not come back soon, but there is promise in the outlook. The business is strong and growing, producing solid cash flows. It allows them to sustain a cash position, pay down debt and reduce the deficit, which is down nearly 25% YOY. At this pace, shareholder equity could return to positive territory in early F2025, only two quarters away. 

The technical outlook: On the brink of higher prices 

Brinker International hit bottom in 2022 and is now in full reversal. Since then, the stock is up more than 100%, breaking above critical resistance. Critical resistance is at the baseline of a bullish Head & Shoulders Pattern near $43.85. Now that resistance is broken, the market should be able to sustain a rally. The next targets for significant resistance are at $50 and $60.

Brinker International chart

Should You Invest $1,000 in Darden Restaurants Right Now?

Before you consider Darden Restaurants, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Darden Restaurants wasn't on the list.

While Darden Restaurants currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

7 Stocks to Ride The A.I. Megaboom Cover


We are about to experience the greatest A.I. boom in stock market history...

Thanks to a pivotal economic catalyst, specific tech stocks will skyrocket just like they did during the "dot com" boom in the 1990s.

That’s why, we’ve hand-selected 7 tiny tech disruptor stocks positioned to surge.

  1. The first pick is a tiny under-the-radar A.I. stock that's trading for just $3.00. This company already has 98 registered patents for cutting-edge voice and sound recognition technology... And has lined up major partnerships with some of the biggest names in the auto, tech, and music industry... plus many more.
  2. The second pick presents an affordable avenue to bolster EVs and AI development…. Analysts are calling this stock a “buy” right now and predict a high price target of $19.20, substantially more than its current $6 trading price.
  3. Our final and favorite pick is generating a brand-new kind of AI. It's believed this tech will be bigger than the current well-known leader in this industry… Analysts predict this innovative tech is gearing up to create a tidal wave of new wealth, fueling a $15.7 TRILLION market boom.

Right now, we’re staring down the barrel of a true once-in-a-lifetime moment. As an investment opportunity, this kind of breakthrough doesn't come along every day.

And the window to get in on the ground-floor — maximizing profit potential from this expected market surge — is closing quickly...

Simply enter your email below to get the names and tickers of the 7 small stocks with potential to make investors very, very happy.

Get This Free Report
Thomas Hughes
About The Author

Thomas Hughes

Contributing Author

Contributing Author

Like this article? Share it with a colleague.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Texas Roadhouse (TXRH)
4.3316 of 5 stars
$171.965.3%1.58%26.25Moderate Buy$195.25
Cracker Barrel Old Country Store (CBRL)
4.6854 of 5 stars
$40.282.4%2.48%19.46Reduce$52.14
Darden Restaurants (DRI)
4.8598 of 5 stars
$184.952.1%3.24%19.82Moderate Buy$225.59
Compare These Stocks  Add These Stocks to My Watchlist