Goldman Sachs backs Brinker International despite stock drop

On April 29, 2025, Brinker International, the parent company of restaurant chains such as Chili's and Maggiano's Little Italy, released its fiscal third-quarter earnings report. The company reported adjusted earnings of $2.66 per share on revenue of $1.43 billion, surpassing analysts' expectations of a profit of $2.56 per share on revenue of $1.38 billion. Despite these positive indicators and a raise in its full-year revenue guidance, shares plummeted by 15% the following day, indicating a concern among investors about the sustainability of growth. Analysts speculated that some investors considered the growth trajectory of Chili's unsustainable despite the brand's recent efforts to improve sales and traffic. Goldman Sachs, however, remained optimistic about Brinker International and upheld its buy rating on the stock. Analyst Christine Cho increased the 12-month price target from $190 to $191, projecting a potential 40% upside from the previous day's closing price. Cho argued that the market is undervaluing the significant impact of Chili's turnaround efforts, and pointed out that the restaurant chain has been able to outperform the industry without introducing new menu items or value news. Despite the anticipated challenges in maintaining same-store sales growth in the quarters ahead, Cho expresses faith that ongoing initiatives, like viral campaigns and menu innovations, will continue to enhance restaurant performance. In addition to focusing on Chili's, Goldman Sachs recognizes similar recovery potential for Maggiano's Little Italy. As part of its strategy to revitalize the brand, Maggiano's has implemented upgraded recipes and discontinued deep value discounts, actions perceived as aligned with brand integrity. Although the turnaround of Maggiano's is still in its early stages, analysts within Goldman Sachs expect that these enhancements in menu quality, improved customer service, and an updated restaurant ambiance will contribute positively to the overall performance of the brand in the upcoming quarters. With the projected optimistic growth in both Chili's and Maggiano's, Goldman Sachs reassured stakeholders about Brinker International’s forward trajectory. Overall, despite the immediate negative market reaction, the assessment from Goldman Sachs underscores a more bullish long-term outlook for Brinker International, highlighting that the market may not fully account for the company's strategic advancements and potential for recovery in its restaurant brands.