During the pandemic, Texas Roadhouse implemented savvy strategies to support its businesses. Now we think it’s well-positioned to capitalize on its popular offerings to keep attracting dine-in, pick-up and takeout customers.
We recommend this stock as a Power Buy. Management reported a 15.3% increase in overall sales and despite higher costs driven by inflation, the company’s profits rose by 21.0%.
The stock trades at 26.5 times the company’s 2024 earnings forecast even after an impressive 48% gain over the last year – a rise that substantially outperformed the S&P500.
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TEXAS ROADHOUSE (Nasdaq symbol TXRH; texasroadhouse.com) is a full-service, casual-dining restaurant chain with 741 locations spread across 49 U.S. states and 10 foreign countries.
Each of those restaurants operates under one of three banners—Texas Roadhouse (686 locations), sports restaurant Bubba’s 33 (45), and Jaggers (10).
Founded in 1993, the Texas Roadhouse chain offers moderately priced, full-service dining. It specializes in handcut steaks cooked over an open grill. Ribs, seafood, chicken, pork chops, pulled pork and vegetable plates are also on the menu, along with hamburgers, salads and sandwiches.
Texas Roadhouse also gives its guests a free unlimited supply of in-shell roasted peanuts and fresh-baked dinner rolls.
Bubba’s 33 is a family-friendly sports restaurant offering an assortment of wings, sandwiches, pizza and burgers. That includes its signature 33% bacon-grind patty. In addition, the chain offers an extensive selection of draft beer.
Jaggers is a new fast-food concept featuring hamburgers, chicken, milkshakes and salads made from scratch.
Growth Stocks: Texas Roadhouse’s earnings rise despite inflation thanks to a winning formula
In the quarter ended December 26, 2023, overall sales jumped 15.3%, to $1.16 billion from $1.01 billion a year earlier. Same-store sales rose 9.9% for company-owned restaurants and 8.9% for U.S. franchise locations. Some 12 company restaurants and seven franchise restaurants were opened in the quarter.
Texas Roadhouse made $72.4 million, or $1.08 a share. That was up 21.0% from $59.9 million, or $0.89.
During the pandemic, the company successfully expanded its takeout, pick-up and delivery business. Its own mobile ordering app has also encouraged repeat business. Not only that, new delivery channels and digital capabilities put the company—with its winning formula of moderately priced but high-quality food—in position to move even higher as the economy further returns to normal.
With the March 2020 payment, Texas Roadhouse handed investors a 20.0% rise in the quarterly dividend. But it then suspended paying dividends to conserve cash.
However, the company reinstated a quarterly cash dividend of $0.40 per share in June 2021. Most recently, Texas Roadhouse announced a 10.9% dividend increase starting March 2024. That brings the quarterly payment to $0.61a share. The stock now yields 1.6%.
Recommendation in Power Growth Investor: Texas Roadhouse Inc. is a buy.
