Despite Weaker Industry Trends, BTIG Is Still Buying Brinker

BTIG maintained its Buy rating and $57 price target on Brinker International, Inc. EAT despite cutting its same store sales estimate for Chili's due to weak industry trends. Dallas, Texas-based Brinker operates casual dining restaurants under the Chili's Grill & Bar brand name and Maggianos Little Italy brand. Analyst Peter Saleh slashed his third quarter same store sales view of the company-owned Chili's to (1.0 percent) from (0.5 percent), hurt by weaker industry trends in March, and "likely continued sales weakness in oil-dependent markets." However, the analyst maintained his third quarter EPS estimate of $1.00, which is above the consensus figure of $0.99, saying that modestly better margin performance and a lower share repurchase price could offset the weaker sales. Saleh also keeps his 2016 EPS view of $3.55 unchanged, while consensus estimate calls for 2016 earnings of $3.56. Brinker sees FY16 EPS at $3.55 - $3.65 but indicated that the third quarter EPS growth would be in the mid-single digits citing lower restaurant-level margin. The analyst expects restaurant-level margin to decline 100 bps on higher labor costs and moderately higher restaurant expenses. Saleh maintained his Buy rating on the stock saying "We continue to believe that Brinker's stock has limited downside given the double-digit free cash flow yield, low single-digit dividend yield and industry low P/E multiple." Shares of Brinker were down 0.42 percent to $47.04.