Texas Roadhouse is the IBD Stock Of The Day for Wednesday. Shares are trading in a narrow range near a buy point atop a 43% rally so far this year.
Texas Roadhouse is coming off another strong quarterly beat that marked three straight quarters of accelerating earnings growth.
The Louisville, Ky.-based restaurant chain on July 25 reported a 47% increase in earnings to $1.79 per share, clearing views for $1.64. Total revenue jumped 14.5% to $1.341 billion. FactSet expected $1.338 billion in revenue.
Comparable sales at Texas Roadhouse company locations rose 9.3% for the quarter, outpacing estimates of 9% growth. Domestic franchise restaurants saw same-store sales increase 8.3%.
Restaurant margin as a percentage of sales also improved, to 18.2% from 15.7% last year, primarily driven by higher sales. The company noted it benefited from higher average customer checks and improved labor productivity.
Average weekly sales at restaurants during the quarter rose 8.4% to $158,991. Meanwhile, average to-go weekly sales climbed nearly 8% to $19,975.
CEO Jerry Morgan noted that strong traffic trends and "some" relief on commodity inflation led to higher profitability across all its brands.
Texas Roadhouse reported that company restaurants saw an 8% increase in comparable sales during the first four weeks of Q3 compared with last year.
However, restaurant stocks in general have struggled over the past few months. The likes of Chipotle Mexican Grill, Wingstop, Cava Group and Sweetgreen have pulled back after hitting record highs in June.
Meanwhile, McDonald's, Starbucks and Olive Garden-parent Darden Restaurants are among those that have tumbled this year on slowing traffic and higher food prices.
Texas Roadhouse Stock
Texas Roadhouse is on the IBD 50 list and leads the Retail-Restaurants industry group, according to the IBD Stock Checkup. The group, which ranks 88th out of the 197 groups tracked by IBD, has gained 19.2% so far this year.
Texas Roadhouse has traded in a tight range over the past several weeks, just above its 10-week moving average. Investors can treat the current pattern as a flat base, although it doesn't quite meet the definition.
Flat bases need at least five weeks to form. Texas Roadhouse's current base is still working on its fifth week. TXRH stock is trading with a 175.72 buy point, plotted off the intraday high from June 28. The base has formed nicely upon support at the stock's 10-week moving average.
Texas Roadhouse has a 98 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score. TXRH stock has a 96 EPS Rating following the chain's accelerating earnings growth. The stock's relative strength line is slightly off its late-May highs but still has a robust 91 RS Rating.
TXRH stock spiked 43% in 2024 through Tuesday.
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