Why Brinker Shares Cooled Off

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Brinker International (NYS: EAT) fell as much 12% after the Chili's parent posted an underwhelming earnings report this morning.

So what: We've seen other restaurant companies come up short this quarter, and Brinker President Wyman Roberts echoed this theme, warning about softening sales trends late in its first quarter and into the current one. Lowered Q2 guidance of $0.48 to $0.50 cents per share was below Wall Street's $0.55 projection, sending investors fleeing.

Elsewhere, revenue increased 2% to $683.5 million, which was slightly ahead of expectations, while EPS grew 23% to $0.37 a share thanks to cost-cutting initiatives and share buybacks. That figure missed estimates by a penny. Comparable sales for the quarter were 2.6% but slowed from 3.7% in July to 1.6% in September.

Now what: Investors may be overreacting to the news, as this slowdown seems to largely be a result of a broader industry trend. Brinker, which also owns Maggiano's Little Italy, has pumped up its share price over the past year by expanding internationally, franchising, buying back shares, and cutting costs. Shares had climbed about 50% in the past year before today's sell-off, so perhaps they were due for a pullback. Nevertheless, there seems to be no pressing reason for investors to flee now.

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The article Why Brinker Shares Cooled Off originally appeared on Fool.com.

Jeremy Bowman and The Motley Fool have no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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