Brinker stock nears 52-week low; Citi highlights near-term challenges

Jun. 16, 2022 11:57 AM ETBrinker International, Inc. (EAT)BJRI, BLMN, CAKE, TXRHBy: Preeti Singh, SA News Editor

Chili’s restaurant exterior building in Victorville, CA

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Brinker International (NYSE:EAT) stock is nearing the low-end of its 52-week trading range as Citigroup cut price target on the stock and rated it as Neutral/High Risk.

Citi's rating is in line with SA Quant rating of Hold, but is in contrast to SA Authors' Rating of Buy.

The restaurant company saw it PT slashed from $40 to $27 and its FY22/FY23 EPS estimates lowered from $3.26/$4.12 previously to $3.13/$3.36 to "better reflect softening demand for the lower-income consumer, friction around the labor model as well as higher input inflation." The new PT implies an NTM (next-twelve-month) ratio of 5.5x and a ~14% FCF yield.

Citi analysts see "the combination of recent pricing actions and the industry's highest level of inflation in over 10 years as a recipe for top and bottom-line challenges for the company's primary value-centric brand in the near-term and believe the company's multi-year targets outlined in Oct. 2021 appear aspirational more than achievable."

EAT shares are down over 7% today to $24.52, close to the lower end of its 52-week trading range. Since the start of 2022, Brinker (EAT) shares have slumped ~35%, and over a period of one year, shares are down 58%.

Take a look at how Brinker performed in fiscal third quarter

Brinker (EAT) is among a list of other U.S. restaurant stocks whose PTs were adjusted by Citi in the wake of the recent rise in inflation and the expectation of higher interest rates.

BJ's Restaurants (BJRI) PT was lowered from $30 to $24; Bloomin' Brands (BLMN) target cut to $19 and $24; Cheesecake Factory (CAKE) cut from $43 to $52; and Texas Roadhouse (TXRH) lowered from $103 to $107.

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