Texas Roadhouse on Thursday night reported mixed second-quarter results as elevated beef costs weighed on profitability. Still, the firm posted robust comparable gross sales and stated the ongoing third quarter was off to an excellent begin, offsetting some fears round greater enter costs. Revenue in the quarter ended July 1 elevated 12.8% yr over yr to $1.51 billion, exceeding the LSEG-complied Wall Street consensus estimate of $1.50 billion. Earnings per share (EPS) elevated 4% on an annual foundation to $1.86, lacking expectations of $1.91, LSEG information confirmed. Shares had been down a little bit greater than 1% in prolonged buying and selling Thursday. The stock has been drifting decrease this summer time, closing the common session down 7.4% from its late May excessive of the yr. Bottom line Texas Roadhouse is executing on what it may management – creating an gratifying surroundings and providing full menus at reasonably priced costs – and it is displaying inside the results. When the restaurant chain reported Q1 results in early May, administration stated same-store gross sales development for the second quarter had been monitoring at 5%. This is vital restaurant trade metric can be known as comparable gross sales, or comps. We had been happy to see that the 5% development price not solely sustained by way of the quarter, however improved a little bit additional. What a distinction the climate could make. By month, comparable gross sales, a key restaurant trade metric, elevated 4.3% in April, 7.2% in May, and 5.8% in June. Companywide, same-store gross sales elevated 5.8% in the quarter, largely pushed by a rise in buyer visitors — an excellent signal. This outcome beat the consensus of 5.3%, in response to FactSet. Even higher, these constructive traits continued early into the third quarter, with comparable gross sales up 5.3% by way of the first 5 weeks, beating the consensus estimate of about 5%. This robust price features a adverse 60 foundation level stress from the calendar shift of the Fourth of July. Texas Roadhouse Why we personal it: Texas Roadhouse is a fast-casual steak chain that provides high quality meals at an reasonably priced value in a enjoyable environment, creating one in all the extra compelling worth propositions for customers in the full-service eating class. A considerable majority firm’s shops are company-owned shops, with solely a small proportion as franchise areas. Competitors: Darden (Olive Garden, LongHorn Steakhouse), Brinker (Chili’s and Maggiano’s), Bloomin’ Brands (Outback, Carrabbas Italian Grill, BonefishGrill) Portfolio weighting: 2.3% Most current purchase: April 9, 2025 Initiated: Feb. 4, 2025 Usually, robust visitors and comparable gross sales efficiency translate to working leverage, margin growth, and earnings per share development. But out of the firm’s management is beef inflation. This headwind weighed on the second-quarter results and is anticipated to be even worse in the third quarter. The firm has some counterbalances in its disposal, together with elevating menu costs and labor inflation is coming in a little bit bit higher than anticipated. On the name, CEO Jerry Morgan stated the firm plans to boost costs by 1.7% at the starting of the fourth quarter. “We feel confident this is the right level of pricing to maintain our everyday value while offsetting some of the inflationary pressures we are facing,” he stated. We are as soon as once more torn on Texas Roadhouse. The continued traffic-driven comps are proof that the model is beloved and the idea works wherever they open up a brand new location – and the firm is doing loads of it. The shopper could get extra “picky” and “choosy” in the again half of the yr, however Texas Roadhouse is a wise place to flock to get nice bang for one’s buck. However, beef costs are the whole lot for this steakhouse chain, and even with the robust comps, we in all probability will not see the huge stock breakout we have been ready for till costs fall. Tight cattle provides in the U.S. have pushed beef prices up in recent times. On Thursday, cattle futures traded on the Chicago Mercantile Exchange hit one other document excessive. That’s our present view. We stay optimistic about the future, supported by robust visitors traits, ongoing franchise acquisitions, and development from new retailer openings. However, commodity pressures stay a headwind, which is why we’re sustaining our hold-equivalent 2 ranking and refraining from shopping for the stock till we see a extra engaging entry level. Commentary The higher than anticipated comparable gross sales development of 5.8% was pushed by a 4% improve in visitors and a 1.8% improve in the common examine. Management spent a while on the earnings name strolling by way of a few of the combine dynamics— an trade time period for the gadgets bought — impacting examine ranges. The alcohol class continues to be a drag, an indication that persons are consuming much less when they’re eating out. This is a society-wide development. Introducing nonalcoholic cocktails, usually known as mocktails, to the menu has been a technique the firm has addressed the weak spot in alcohol. On the entree facet, administration known as out friends buying and selling as much as both greater steaks or ordering steak extra usually versus different dishes like rooster. During the quarter, Texas Roadhouse opened four-company owned eating places, together with two Bubba’s 33 areas, and one franchise restaurant. Management stated it is on monitor to open roughly 30 company-owned eating places this yr and will perform a little greater than that subsequent yr attributable to plans to step up development for Bubba’s 33, its sports-bar chain with 52 areas at the moment. Additionally, Texas Roadhouse accomplished the acquisition of three franchise eating places, bringing its year-to-date complete to 17. Texas Roadhouse stated it has plans in place to accumulate eight home franchise eating places in the coming quarters, together with its 5 remaining franchised areas in California. The firm buys again these franchised areas now and again, and we typically assume these are an excellent use of money. Bringing franchised areas below the company umbrella provides the firm extra management over the whole lot in its eating places and usually results in stronger working results. As for money returns to shareholders, the firm purchased again $9.8 million value of stock in the quarter. That’s a step down from the $50.2 million value of shares repurchased in the first quarter. Guidance As talked about earlier, Texas Roadhouse comparable gross sales at company-owned eating places elevated 5.3% yr over yr by way of the first 5 weeks of the third quarter. For 2025, administration reaffirmed most of its outlook. It continues to anticipate constructive comp gross sales development, together with the advantage of menu value actions. It additionally continues to anticipate capital expenditures totaling $400 million and so-called retailer week development of 5% Store week development is a option to measure each new retailer openings and franchise acquisitions. However, the firm now expects commodity price inflation to be roughly 5%, which is up from final quarter’s view of 4%. This is clearly disappointing to see however it’s not a whole shock since beef costs are on the rise. Partially offsetting the worsening commodity prices is a greater view on wage and labor inflation. Management now sees that growing 4%, which is the low finish of its earlier steerage vary of 4% to five%. Management additionally lowered its anticipated efficient earnings tax price to fifteen% from a variety of 15% to 16%. (Jim Cramer’s Charitable Trust is lengthy TXRH. See right here for a full listing of the shares.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll obtain a commerce alert earlier than Jim makes a commerce. Jim waits 45 minutes after sending a commerce alert earlier than shopping for or promoting a stock in his charitable belief’s portfolio. 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