Brinker International Downgraded at Piper Jaffray (EAT)

in Debt Gold Gold Investment by admin — March 16, 2010 6:06 am | no comments

Restaurant chain operator Brinker International, Inc. ( EAT ) saw its rating and estimates decreased on Tuesday by analysts at Piper Jaffray. The analyst cut its rating on EAT to “Underweight” from “Neutral,” and set a $16 downside price target on the shares, which had closed at $19.67 on Monday. The firm noted that “On a relative basis, we prefer the limited service segment to casual dining on merits of valuation, supply/demand and demographics. Specific to Brinker, comps trends (at Chili’s primarily) are at risk with the evolving, but yet to be determined, “tool kit” of value messaging. With EAT shares trading above our price target by nearly 23% (stock up 32% YTD) and when considering the risk of sequentially weaker SSS, we see limited multiple and earnings expansion on the horizon. We are lowering our 3Q10 Chili’s comp estimate to (4%) versus (3%) prior.” Piper Jaffray also said that “We now expected (Q3) earnings to decline 9.0% to $0.41 per share versus $0.44 prior. Total revenues are expected to decline 5.0% to $814.2 million versus $837.1 million prior, partially based on our systemwide same-store sales estimate of (4.0%) versus (3.2%) prior…According to our channel checks, March is “better” so far. Big picture, we credit Brinker with reducing debt and 1H10 improved SSS and traffic, but we believe this is reflected in the current stock price.” Brinker International shares fell 55 cents, or -2.8%, in premarket trading Tuesday. The Bottom Line We have avoided shares of EAT since our early June 2008 coverage began, when shares traded at $20.09. The company has a 2.24% dividend yield, based on last night’s closing stock price of $19.67. The stock has technical support in the $15 price area. If the shares can firm up here, we see overhead resistance around the $21-$23 price levels. We would remain on the sidelines for now. Brinker International, Inc. ( EAT ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars. Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .