Texas Roadhouse (TXRH, Financial) reported spirited financial results on the board for the second-quarter 2014. It’s squeezed processes and enhanced execution drove a lot of traffic across its restaurants in the region. Also, continued performance from its new restaurants and positive comp sales was so encouraging it fueled its performance for the quarter.
Impressive performance
The Louisville-based steakhouse chain for the second-quarter posted strong double digit growth in both the top as well as the bottom lines. Its revenue for the quarter rose 12% to $395.4 million as compared to $352.1 million in the same quarter a year ago. Also, its net income for the quarter surged 16% to $23.1 million or earnings of $0.33 per share from net income of $ 19.9 million or earnings of $0.28 per share in the corresponding period last year. The consensus was estimating earnings of $0.33 per share on the revenue of $394.07 million for the quarter.
Looking forward the company is committed to drive its growth through opening new restaurants in new and existing markets. It anticipates its legendary food and services not only to drive traffic across its restaurants in the region but also to gain additional market share for the company. The steakhouse chain expects positive same store sales in the second-half of the year. Moreover, the company is also seeing slight improvement in its margins due to higher menu prices and lower food costs that should certainly supplement its top line growth in the second-half. The same store sales grew about 4% during the fourth-quarter, recording 16 consecutive straight quarters of growth for its same store sales.
Expansion plans
Texas Roadhouse remains on track with its estimates of opening approximately 25 to 30 restaurants for this calendar year. It has already opened 14 restaurants during the first half so far and plans to open about 11 new restaurants in the second-half of the year. It has also opened its first restaurants in Alaska. Moreover, the company continues to expand its presence in small and mid-sized cities.
It also plans to open new restaurants in the large cities in the United States that offers plenty of rooms for the company to grow in the future. The company now has its presence in 49 states and franchises in three overseas countries. It also plans to open around 25 to 30 restaurants by next fiscal year 2015. It is also planning to strengthen its international operation. The company has strong international pipeline and it remains on track to further capitalize on.
The company continues to receive stiff competition from its rivals such as Ruth Hospitality Group as well as Bloomin' Brands. Ruth Hospitality Group also posted strong results for the first quarter. Its revenue increases 3.6% to $109.7 million, while its net income rose solid 16% to $8.9 million. Also its same store sales grew about 2.6%. Also, its average check size grew 5.3% that helped the company to offset the stiff slowdown in its traffic for its unit like Ruth's Chris Steak House and Mitchell's Fish Market.
Meanwhile, its other competitor Bloomin Brands that operates Outback Steakhouse Carraba's Italian Grill and Bonefish Grill continues to experience decline in the same-store sales. However the company is transforming its business and executing various strategic moves such as closing of its underperforming units. It closed down approximately 25 restaurants since 2013.
However Texas Roadhouse is performing quite better. It has already seen around 4.0% growth in the third quarter for first four weeks. The analysts have estimated CAGR of 12.52% for the next five years that indicate tremendous growth prospects for the company. Its short term prospects also look bright with CAGR of 16.70% this year and 15.90% for the next year respectively.
Valuation
The company is currently trading at the trailing P/E of 24.47 and forward P/E of 19.77 that indicate reasonable valuation for the stock that offers a lot of rooms to grow in the future. Also it has PEG ratio of 1.83 that continues to support its growth over the coming years. It has profit and operating profit margins of 5.58% and 8.32% respectively, making it a good investment.
