Texas Roadhouse’s (NASDAQ:TXRH) Q3 Earnings Results: Revenue In Line With Expectations
Restaurant company Texas Roadhouse (NASDAQ:TXRH) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 13.5% year on year to $1.27 billion. Its GAAP profit of $1.26 per share was 4.4% below analysts’ consensus estimates.
Is now the time to buy Texas Roadhouse? Find out by accessing our full research report, it’s free.
Texas Roadhouse (TXRH) Q3 CY2024 Highlights:
- Revenue: $1.27 billion vs analyst estimates of $1.27 billion (in line)
- EPS: $1.26 vs analyst expectations of $1.32 (4.4% miss)
- EBITDA: $146.5 million vs analyst estimates of $148.4 million (1.3% miss)
- Gross Margin (GAAP): 16.5%, up from 15.1% in the same quarter last year
- Operating Margin: 8%, up from 6.6% in the same quarter last year
- EBITDA Margin: 11.5%, up from 10.1% in the same quarter last year
- Free Cash Flow Margin: 3.7%, up from 1.2% in the same quarter last year
- Locations: 772 at quarter end, up from 722 in the same quarter last year
- Same-Store Sales rose 8.5% year on year, in line with the same quarter last year
- Market Capitalization: $11.93 billion
Jerry Morgan, Chief Executive Officer of Texas Roadhouse, Inc. commented, “We are extremely pleased in such a competitive environment to report another quarter of continued traffic growth at each of our brands. This is a credit to the hard work of our operators who create an environment where Roadies want to work and guests want to dine.”
Company Overview
With locations often featuring Western-inspired decor, Texas Roadhouse (NASDAQ:TXRH) is an American restaurant chain specializing in Southern-style cuisine and steaks.
Sit-Down Dining
Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
Texas Roadhouse is one of the larger restaurant chains in the industry and benefits from a well-known brand that influences consumer purchasing decisions.
As you can see below, Texas Roadhouse’s 14.1% annualized revenue growth over the last five years (we compare to 2019 to normalize for COVID-19 impacts) was impressive as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Texas Roadhouse’s year-on-year revenue growth was 13.5%, and its $1.27 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 11.7% over the next 12 months, a slight deceleration versus the last five years. This projection is still admirable and shows the market sees success for its offerings.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
Restaurant Performance
Number of Restaurants
A restaurant chain’s total number of dining locations often determines how much revenue it can generate.
Texas Roadhouse sported 772 locations in the latest quarter. Over the last two years, it has opened new restaurants at a rapid clip and averaged 5.9% annual growth, among the fastest in the restaurant sector.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where the concept has few or no locations.
Same-Store Sales
A company's restaurant base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth for restaurants open for at least a year.
Texas Roadhouse has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 9.1%. This performance suggests its rollout of new restaurants is beneficial for shareholders. We like this backdrop as Texas Roadhouse has multiple ways to win: revenue growth can come from new restaurants or increased foot traffic and higher sales per customer at existing locations.
In the latest quarter, Texas Roadhouse’s same-store sales rose 8.5% annually. This performance was more or less in line with the same quarter last year.
Key Takeaways from Texas Roadhouse’s Q3 Results
We struggled to find many strong positives in these results as its EBITDA and EPS missed Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 1.3% to $178.50 immediately following the results.
Texas Roadhouse’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
