We’re buying the post-earnings dip in a restaurant stock controlling what it can
We’re buying 40 shares of Texas Roadhouse at roughly $174. Following Friday’s trade, Jim Cramer’s Charitable Trust will own 490 shares of TXRH, increasing its weighting to about 2.35% from 2.17%. We’re buying the post-earnings pullback in Texas Roadhouse, adding back half the 80 shares we sold around $190 in May, and upgrading our rating to 1. The steakhouse chain reported mixed second-quarter results after Thursday’s closing bell. There was a ton to like in the results, with comparable sales accelerating from the first quarter to 5.8% in the second quarter, with traffic accounting for most of the increase. The third quarter is also off to a great start with comps up 5.3% through its first five weeks. The only issue with the quarter was costs out of the company’s control. Rising prices forced the company to increase its commodity cost inflation outlook again, pressuring restaurant margins. Analysts lowered their earnings per share (EPS) forecasts for 2025 and 2026 as a result, and negative earnings revisions are why the stock is getting hit on Friday. TXRH YTD mountain Texas Roadhouse YTD Beef inflation is a problem — there’s no getting around that — but the commodity won’t increase in perpetuity. The cure for higher prices is higher prices — and at some level, consumers will seek alternatives, and there will be a big push next year to increase cattle herds to capitalize on the commodity strength. Now that the company has reduced expectations — and the stock has adjusted as a result — the attention should shift back to the strong same-store sales. Texas Roadhouse’s outperformance in this metric indicates the brand is loved, and there are no issues getting people to dine in their restaurants despite strategic menu price increases and economic uncertainty. There aren’t a lot of restaurant companies of Texas Roadhouse size delivering consistent mid-single-digit comp growth. Lastly, the company wasn’t that aggressive with its share buyback program in the second quarter. They’d rather use that cash to buy franchise locations. Plus, it sounds like the company is preparing for an accelerated unit growth expansion program in 2026. The historical cadence is about 30 new company-owned locations per year, but management’s comments suggest that next year’s number could be in the high 30s. This was a great thing to learn. Even with these expansion plans, we still anticipate management will be more opportunistic with the buyback this quarter, given the stock’s current levels, much like how they were buyers around here in the first quarter. (Jim Cramer’s Charitable Trust is long TXRH. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
