Brinker International

Chili's just delivered its 20th consecutive quarter of same-store sales growth at 4% in Q3, even while lapping a massive 31% comp from a year ago. February and March both came in at 5.9% with positive guest traffic. Earnings per share grew to 2.87 dollars from 2.56 a year ago, a 12% increase, while the company spent 108 million dollars buying back stock.

Brinker raised the low end of its full-year earnings guidance to a range of 10.60 to 10.85 dollars per share, up from 10.45 previously. Free cash flow is strong enough to fund both the buyback and a reduction in capital spending. Chili's franchisee sales also grew 15% in the quarter, showing the brand resonates well beyond company-owned restaurants.

Maggiano's same-store sales fell 4.6% as guests stayed away from the higher-priced Italian menu. Its operating margin collapsed to 4.3% from 8.8% last year. The brand is a small fraction of total revenue but it remains a drag on overall results and a sign that customers are tightening their belts on premium dining.

Even at Chili's, restaurant-level operating margin tightened slightly to 18.4% from 18.9% as commodity costs, manager salaries, and delivery fees ate into the bottom line. The stock has run up around 8% over the past year and now trades at around 14 times forward earnings, so future upside depends on Chili's keeping the comp streak alive without much room for misses.