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Brinker (EAT) Buys 23 Chili's Restaurants From Chesapeake Foods

Zacks Equity Research
·2 min read

Brinker International, Inc. EAT recently announced that it has sealed the acquisition of 23 Chili's Grill & Bar restaurants from its 37-year franchisee, Chesapeake Foods, Inc, located in the Mid-Atlantic region.

Joe Taylor, executive vice president and chief financial officer of Brinker said, “We've always appreciated the decades of quality operating performance that Chesapeake Foods brought to the partnership. We're excited about the opportunity to invest in this team and further grow Chili's presence in the Mid-Atlantic region.”

Brinker announced that the acquisition is likely to generate incremental free cash flow in fiscal 2022 apart from being EPS accretive. In 2019, the company completed the buyout of 116 Chili's Grill & Bar restaurants from ERJ Dining.

Shares of the company have gained 14.9% in the past year, compared with the industry’s rally of 27.4%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Chili's Driving Growth

Chili’s turnaround strategies yielded positive results with traffic and sales moving in the positive direction. These strategies are focused on simplifying Chili’s core menu by improving recipes, strengthening value proposition with higher-quality ingredients, and new cooking techniques to deliver better food at even more compelling price points. Chili’s continues to hold a dominant position in the casual dining sector, ranking as the number one brand in the KNAPP-TRACK index each month in first-quarter fiscal 2021.

The company is confident that Chili's will continue to drive growth despite the pandemic. During the fourth quarter of fiscal 2021, comps at Chili's franchised restaurants increased 104.6% against a decline of 32.2% in the year-ago quarter. At international franchised Chili’s restaurants, the same soared 159.1% versus the year-ago quarter’s slump of 66.1%. Meanwhile, at the U.S. franchised units, comps increased 84.9% against the year-ago quarter’s fall of 39.9%.

Zacks Rank & Key Picks

Currently, Brinker carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same industry include The Wendy's Company WEN, Jack in the Box Inc. JACK and Papa John's International, Inc. PZZA, each carrying a Zacks Rank #2 (Buy).

Wendy's has a three-five-year earnings per share growth rate of 9%.

Jack in the Box has a trailing four-quarter earnings surprise of 26.4%, on average.

Papa John's earnings for 2021 are expected to rise 122.9%.


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Brinker International, Inc. (EAT) : Free Stock Analysis Report

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Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report

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Zacks Investment Research