Zacks Investment Research downgraded shares of Brinker International Inc. (EAT) from OUTPERFORM to NEUTRAL on November 19, 2012, with a target price of $30.00.
Brinker's first quarter 2013 earnings lagged the Zacks Consensus Estimate by a penny, but surpassed the year-ago earnings based on continuous increases in comps and unit expansion. Additionally, continuous growth in comps and margins suggest that the company's efforts to reposition its Chili's brand are paying off. Moreover, the full installation of point-of-sale and back office systems and new kitchen equipments system by end of the year will further boost the development of the brand. Thus the company remains on track to double its earnings per share (EPS) and achieve margin expansion of 400 bps by 2015. Brinker's financial position also remains stable and management continues to enhance shareholders' value. However, with sluggish casual dining demand and low consumer spending amid an uncertain economic environment comps growth will likely slowdown in the next quarter. Furthermore, cost inflation and stiff competition continue to be headwinds. Hence, we downgrade our recommendation on the stock from Outperform to Neutral.
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