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Texas Roadhouse Slumps on Earnings, Revenue

Texas Roadhouse Slumps on Earnings, Revenue

Texas Roadhouse (NASDAQ:TXRH) joins the growing litany of restaurants that proved, abundantly, that 2020 was a terrible year for restaurants. Not all of them, of course, but any restaurant that primarily relied on people actually sitting down to dinner within. Both earnings and revenue came in below estimates, though the company has some hope for recovery to follow.

Undercooked Numbers

The numbers that came in for Texas Roadhouse were disappointing at best. The company brought in revenue of $0.28 per share, which was a little better than half the expected revenue of $0.49 per share estimated. Revenue fared similarly, as the company posted $637.989 million in revenue against expected revenue of $679.08 million.  Worse, revenue is actually down from the same time last year, to the tune of about 12.03%.

The company noted that costs of relief pay, enhanced benefits packages for employees, and the costs of operating in an environment that demanded new protective measures weighed on the company's profits. While same-store sales were up in October, though just 0.8%, that wasn't enough to ameliorate the losses from November and December, when the company lost 6.3% and 18.2% of sales, respectively. November and December were when some of the country saw Covid-19 numbers engage in resurgence, which has since retracted in most places.

However, despite these sluggish numbers, the company offered up some thrilling guidance; the company expects to open a further 25 to 30 restaurants this year “across all concepts,” reports note. In fact, even during 2020, the company still managed to open up nine new restaurants, including two franchise restaurants and one of the company's new fast-casual concepts known as “Jaggers”.

Analyst Indecision Clouds the Picture

Meanwhile, on the analyst front—based on our latest research—the analyst pool is wracked with indecision about Texas Roadhouse's ultimate fate. The company has been rated a “hold” for the last six months, though the ratios surrounding that hold have swung with surprising abandon.

Six months ago, the company's “hold” consensus was made up of one “sell” rating, 16 “hold”, six “buy” and one “strong buy” rating. Three months ago, the picture was the same, but one more “buy” rating stepped in. A month ago, the company had its most bullish outlook in months, as the “sell” rating had departed altogether and two more “buy” ratings stepped in. Now, things are just a bit less bullish with one “sell” rating, 16 “hold”, seven “buy” and one “strong buy” ratings making up the ratios.

The average price target, meanwhile, has been climbing throughout this period. Six months ago, it sat at $59.98. Three months ago, it jumped to $66.64. A month ago, it jumped again to $71.78, and today, it's just a bit higher still at $73.46. This is also the first time that the consensus price target has represented downside potential in the last six months, as the share price is currently $88.93 as of this writing. Three analysts have raised price targets on Texas Roadhouse just in the last 10 days, including Barclays, Stephens, and Wedbush.

Recovery On the Menu

Texas Roadhouse is looking for recovery in 2021. That much is clear; no one opens 25 to 30 new outlets going into the expectation that things aren't going to get better for the company. Indeed, Texas Roadhouse has a good reason to look for recovery; we've been seeing Covid-19 case numbers on the decline for the last couple months now, which should suggest that it's much safer than it was to get back out and have dinner again. Sure, Texas Roadhouse is likely going to have some hiccups along the way—beef prices, for example, might not be too pleasant coming up here with the Texas freezes—but it's a safe bet that diners will be able to get back in and stay back in for the foreseeable future. It's going to have plenty of competition pursuing the market, however, but that's par for the course as far as restaurants go.

Texas Roadhouse, sadly, isn't an operation that's well-suited to take-out options; it's not exactly easy to tote a steak dinner home in a plastic container, and it only gets worse with mashed potatoes, gravy, and chili getting tossed into the mix. It's doable, of course—people do it every day—but it's sub-optimal at best. That puts it at a disadvantage against many others who are better suited to take-out, a necessity these days.

Still, with the dine-in concept getting reawakened all over, and the likelihood of further lockdowns decreasing with case numbers, Texas Roadhouse has every opportunity to return to its full prominence. That means a clear opportunity for investors to get in and take advantage of the pent-up demand for an evening out with a nice steak dinner.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Texas Roadhouse (TXRH)$104.63flatN/A134.14Hold$96.32