Texas Roadhouse (NASDAQ:TXRH) reported a slight earnings beat in its fourth quarter, with adjusted earnings per share (EPS) of $1.08, surpassing the analyst estimate by $0.02. The company's revenue matched expectations at $1.16 billion, aligning with the consensus estimate. Shares of the restaurant chain rose over 5% following the announcement, indicating a positive investor response to the company's performance.
In a robust quarter, Texas Roadhouse saw a significant 9.9% increase in comparable restaurant sales at company-owned locations and an 8.9% rise at domestic franchise restaurants. Average weekly sales at company restaurants climbed to $141,653, with to-go sales contributing $17,793, up from $130,176 and $16,414, respectively, in the previous year. The increase in restaurant margin dollars by 21.4% to $176.7 million was a key driver of the quarter's success, primarily due to higher sales. Despite facing commodity inflation of 3.2% and wage and labor inflation of 5.5%, the restaurant margin as a percentage of sales improved by 75 basis points to 15.3%.
The company also expanded its footprint, opening 12 new company restaurants and seven franchise locations, and continued its share repurchase program, buying back 40,707 shares for $4.8 million.
Looking ahead to fiscal 2024, Texas Roadhouse provided an optimistic outlook with comparable restaurant sales at company restaurants for the first 50 days of the first quarter increasing by 6.8% compared to the same period in 2023. The company plans to implement a menu price increase of approximately 2.2% in late March. Management anticipates commodity cost inflation of around 5% and an effective income tax rate of approximately 14%. They also expect positive comparable restaurant sales growth, including the benefit of 2023 menu pricing actions, store week growth of about 8%, wage and labor inflation of 4% to 5%, and total capital expenditures between $340 million to $350 million.
The company's CEO commented on the results, stating, "Our team's continued focus on legendary food and legendary service has driven strong sales growth, which, combined with our disciplined approach to cost management, has resulted in impressive bottom-line results."
Investors reacted positively to the earnings release, with the stock price increasing by 5.06%, reflecting confidence in the company's growth trajectory and its ability to manage inflationary pressures while still delivering value to shareholders.
Following the report, Evercore ISI raised its price target for the stock to $160 from $135 per share, keeping its Outperform rating on the name.
"Texas Roadhouse’s SSS growth gap to the industry is widening. Over the last 10+ years, the SSS gap has averaged 5–6pp," said the firm. "In 4Q, the gap was 8pp and in January the gap was a remarkable 12pp.
"The expanding level of outperformance may be evidence of the chain’s improving labor productivity (e.g., table turns at peak hours) combined with a choosier consumer (e.g., rising importance of value)," the analysts added."