Brinker International gains after KeyBanc calls out a compelling entry point (NYSE:EAT)

Brinker International (New York:EAT) rose in early trading Thursday after KeyBanc Capital Markets upgraded the restaurant’s stock to an Overweight rating. The company sees a compelling entry point for investors after the stock’s double-digit decline following Brinker Earnings report.

“We believe Brinker’s Q4 2024 results are underwhelming and deserve praise for the outperformance it has delivered in SSS and traffic,” noted analyst Eric Gonzalez. “While the decision to reinvest some of the SSS growth will impact FY25 earnings (and is now factored into our lower EPS estimates), we believe Brinker is making the right choices regarding the long-term viability of the business, which we believe will ultimately drive earnings higher,” he added.

Gonzalez and his team believe there is a strong case for multiple expansion as Brinker’s (EAT) plan drives sustainable stock gains that will ultimately drive higher margins and earnings per share. KeyBanc’s target price for EAT of $72 equates to about 14 times its 2025 EPS estimate of $5.10, which is noted to be below the casual dining group’s current forward P/E of more than 17 times. EAT is currently trading at about 13.5 times the company’s FY2025 EPS estimate of $4.62.

Brinker International (EAT) shares rose 1.50% In pre-market trading, the stock was trading at $63.80 versus its 52-week range of $28.23 to $76.02. EAT’s Seeking Alpha Quant rating is a Strong Buy, and the stock’s Quant score is the highest in the Restaurants sector.