Brinker International, Inc. (EAT), the owner of Chili’s and other casual dining restaurants, is cutting costs in order to survive the global economic slowdown. The company has met or beaten estimates each of the last 4 quarters. EAT is trading at 10.8x forward earnings.

Company Description

Brinker International operates 1,679 casual dining restaurants in the United States and 27 other countries. Its brands include Chili’s Grill & Bar, Maggiano’s Little Italy and On The Border Mexican Grill & Cantina. The company also holds a minority stake in Romano’s Macaroni Grill.

Recently, the company’s international expansion continued with the opening of the first Chili’s in India. It was the 200th restaurant opening outside of the United States and put the company on track to meet its target of 500 international locations by 2014.

“Our plan is aggressive, about 50 restaurants a year, and we see a world of opportunity out there for us,” said John Reale, president of global business development.

The Indian Chili’s is serving a unique menu specially adapted for Indian customers, with 80% of the dishes being vegetarian.

Brinker Matches Estimates in the Third Quarter

On Apr 21, Brinker reported third-quarter 2009 estimates that rose 36% from the year ago period to 45 cents per share from 33 cents. It met analysts’ estimates.

Revenue, however, did fall 20.4% to $857.4 million from $1,077.2 million the year before. Restaurant sales declined 5.6% across all brands as the economy stalled. Maggiano’s, the slightly more upscale brand, saw the largest sales decline of 9.5%.

Revenue was also impacted by the closure of 47 restaurants and the sale of 198 restaurants, of which 189 were Macaroni Grills, which the company sold in the second quarter of 2009.

The company actively cut costs in the quarter, including changing the menu mix as certain commodity prices spiked.

“We are focused on delivering flavorful food at a great value with outstanding hospitality for our guests,” said Doug Brooks, Chairman and CEO.

“The combination of a commitment to our guests and disciplined restaurant management resulted in margin improvement in the third quarter and will enable our continued success over the long-term,” he said.

Consensus Estimates Rise

Covering analysts are bullish about the fourth quarter and the full year 2009 results. 8 out of 16 analysts have raised fourth quarter estimates in the last 30 days to an average of 47 cents per share from 43 cents. 2 analysts also lowered during that period.

Full year consensus estimates have jumped by 7 cents to $1.38 in the last month.

Analysts are also optimistic about 2010, as consensus estimates have climbed 8.4% in the last month to $1.55 per share.

Value Fundamentals

Brinker International is a Zacks #1 Rank (strong buy) stock. It is trading at 10.8x forward earnings and has a price-to-book ratio of 2.8. The company has an outstanding 5-year return on equity (ROE) of 21.09%.

As an added bonus, Brinker pays a dividend that is currently yielding 2.60%.

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