Should You Buy Texas Roadhouse Stock Before Aug. 6?
Key Points
Texas Roadhouse stock is sizzling ahead of its second-quarter earnings report.
A 27.6% gain over the past 90 days is even more impressive when considering consumers remain wary of inflation.
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Inflation and lack of confidence in personal economies are among the reasons, broadly speaking, that consumer discretionary stocks are scuffling this year. Texas Roadhouse (NASDAQ: TXRH) didn't get the memo.
Ahead of the restaurant operator's second-quarter earnings report on Thursday, Aug. 6, the stock jumped 27.6% over the 90 days ending July 31 and now trades near its 52-week high. All the while, some names in the fast-food and fast-casual camps are disappointing investors. Alone, that strength could make Texas Roadhouse a "buy" in advance of the earnings report. That proposition would be heightened if the Jaggers operator beats estimates calling for earnings per share of $1.90 on sales of $1.68 billion.
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Texas Roadhouse is serving up gains ahead of its earnings report. Image source: Getty Images.
No guarantees, but beating estimates is a legitimate possibility because Texas Roadhouse is on a 60-quarter streak of comparable sales growth. Another reason this restaurant's stock is cooking into earnings is that the company is a margin master. Beef prices have been up nearly 18% over the past year, but in the first quarter, Texas Roadhouse's margins surged by 10.5%. That's appetizing growth against a challenging backdrop.
Margin growth like that, regardless of operating environment, is a testament to strong execution. It also highlights the variable of customer devotion. Texas Roadhouse has it while many peers lack it.
Related to that, Texas Roadhouse could be a post-earnings winner if the company's subsequent commentary highlights reinvestment in stores and other enhancements aimed at improving the dining experience. The chain's knack for checking those boxes keeps customers coming back while underscoring why the stock is up 122.9% over the past five years.
Should management signal continued reinvestment in stores and technology while, hopefully, saying it sees some relief in beef prices, the stock could see further gains after Aug. 6, indicating it's worth looking into before then.
Should you buy stock in Texas Roadhouse right now?
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Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Texas Roadhouse. The Motley Fool has a disclosure policy.
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