Texas Roadhouse, Inc. TXRH has been on a sizzling run this year, with its stock climbing an impressive 35.4%, outpacing the industry’s modest 1.9% growth. But what’s fueling this surge and is there still room for investors to enjoy more gains?
The company’s stellar performance can be attributed to a combination of strong same-store sales, a growing digital presence and aggressive expansion initiatives. Not only has Texas Roadhouse exceeded earnings expectations in four of the last five quarters but also analysts are bullish on its future. Over the past 60 days, earnings estimates for 2024 and 2025 have been raised by 4.5% and 4%, respectively, signaling confidence in the company’s outlook.
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Major Growth Drivers for TXRH Stock
Same-Store Sales and Traffic Gains: TXRH continues to benefit from impressive same-store sales performance. In the second quarter of 2024, Texas Roadhouse’s same-store sales increased 9.3% year over year, reflecting a robust demand for the brand’s offerings. The upside was driven by a rise in guest traffic along with an increase in our per-person average check. The increase in store weeks was due to new store openings.
The company’s ability to maintain strong traffic growth is underpinned by its commitment to providing a high-quality dining experience. Texas Roadhouse’s traffic rose 4.5% in the second quarter, which, combined with a 4.8% increase in average check, led to solid sales momentum. The brand’s unique proposition, centered on value and customer loyalty, has kept it competitive in the casual dining industry despite rising competition and promotional activity from rivals.
Beyond Texas Roadhouse – Bubba’s 33 and Jaggers: TXRH operates not only the Texas Roadhouse brand but also Bubba’s 33 and Jaggers, both of which are gaining significant traction. During the second quarter, Bubba’s 33 reported impressive weekly sales of $123,000 and continues to build guest loyalty. Jaggers, the company’s quick-service brand, witnessed rising consumer awareness, with weekly sales of $73,000. Additionally, Jaggers is expanding its international footprint, with its first franchise location set to open in South Korea. This multi-brand strategy diversifies Texas Roadhouse’s revenue streams and boosts long-term growth potential.
Tech-Driven Efficiency: Texas Roadhouse continues to invest in technology, aiming to improve operational efficiency and customer experience. In the second quarter, the company completed the rollout of its “Roadie First” technology system, which enhances mobile accessibility for employees.
Moreover, Texas Roadhouse is investing in digital kitchen upgrades, with a full rollout expected by 2025. These enhancements aim to streamline service, reduce wait times and boost overall efficiency, which will not only improve margins but also strengthen its competitive edge in a fast-evolving dining landscape.
What’s Next for Texas Roadhouse?
The company’s growth story shows no signs of slowing down. In the first four weeks of third quarter 2024, same-store sales are up by 8%, continuing the momentum from the previous quarter. Texas Roadhouse’s disciplined approach to menu pricing is helping it maintain its value proposition, even inflationary pressures remain a concern. With strong traffic, expanding brands and technology investments set to enhance margins, Texas Roadhouse looks well-positioned to sustain its growth trajectory.
Zacks Rank & Other Key Picks
TXRH currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the Zacks Retail-Wholesale sector include Cracker Barrel Old Country Store, Inc. CBRL, Potbelly Corporation PBPB and El Pollo Loco Holdings, Inc. LOCO, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cracker Barrel has a trailing four-quarter earnings surprise of 8.8%, on average. CBRL’s shares have declined 38.6% in the past year. The Zacks Consensus Estimate for CBRL’s 2024 earnings per share (EPS) indicates 0.94% growth from the year-earlier actuals.
Potbelly Corporation has a trailing four-quarter earnings surprise of 77.5%, on average. The stock has dropped 1.1% in the past year. The Zacks Consensus Estimate for PBPB’s fiscal 2024 EPS implies 33% growth on 6.5% lower revenues from the year-ago levels.
El Pollo Loco Holdings has a trailing four-quarter earnings surprise of 21.6%, on average. LOCO’s shares have risen 52.7% in the past year. The Zacks Consensus Estimate for LOCO’s fiscal 2024 sales and EPS indicates 2% and 12.7% growth, respectively, from the prior-year figures.
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