Earnings Preview: Brinker International

| About: Brinker International, (EAT)
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Brinker International (NYSE:EAT) is expected to report Q2 earnings before market open Thursday, January 21, with a conference call scheduled for 10:00 am ET.


Analysts are looking for a profit of 19c on revenue of $841.62M. The consensus range is 13c-24c for EPS, and revenue of $807.81M-$889M, according to First Call. In October, Brinker forecast FY09 EPS down 15%-25% ex-items, compared to prior guidance of 8%-10% growth from FY09. Brinker recently closed its sale of an 80% stake in Macaroni Grill to Golden Cate Capital for $88M, despite worries from analysts that the frozen credit markets would interfere with the deal. The company is using the cash proceeds to pay down outstanding bank debt. CFO Charles M. Sonsteby said that the ability of the company to complete the transaction in the midst of the current economic environment "speaks to the long-term prospects" for the brand.

Analyst Views

Fitch Ratings believes the sale of Macaroni grill should help discretionary cash flow, although operating cash flow will remain under "significant pressure" due to higher commodity costs and declines in sales. Meanwhile, Raymond James analyst Bryan C. Elliott believes the company will remain "comfortably in compliance" with its debt covenants and that system wide same-store sales will have to drop at a double digit rate in FY09 for the company to be at risk of violating the covenants.