What Happened?
Shares of restaurant company Texas Roadhouse (NASDAQ: TXRH) fell 5.6% in the morning session after the company reported second-quarter earnings that missed analyst expectations, as profitability was squeezed despite higher sales. The restaurant chain posted earnings per share of $1.86, falling short of Wall Street estimates of $1.91. While revenue grew 12.7% year-over-year to $1.51 billion, slightly beating forecasts, this positive was overshadowed by declining profitability. The company's Adjusted EBITDA, a key measure of profit, also missed expectations. Furthermore, its gross profit margin decreased by 1.1 percentage points from the prior year to 17.6%, highlighting pressure on profitability. The results indicated that while the company was successfully growing its sales, its earnings did not keep pace.
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What Is The Market Telling Us
Texas Roadhouse’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was about 2 months ago when the stock gained 5.3% on the news that the major indices rebounded (Nasdaq +1.5%, S&P 500 +1.0%) as reports pointed to easing tensions between Israel and Iran. The Wall Street Journal said senior Iranian officials had signaled a willingness to restart stalled nuclear talks, on the condition that Washington refrain from joining Israel's ongoing strikes. This development triggered a significant decline in oil prices, easing inflation concerns. Also, it is possible some investors were buying the dip following the sell-off at the end of the previous week.
Texas Roadhouse is down 3.8% since the beginning of the year, and at $174.29 per share, it is trading 15.1% below its 52-week high of $205.27 from November 2024. Investors who bought $1,000 worth of Texas Roadhouse’s shares 5 years ago would now be looking at an investment worth $2,894.
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