sterne agee on brinker - eat

8/11/2019 Sterne Agee on Brinker - EAT

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Flash NoteAugust 22, 2014

Brinker International Inc.EAT: Increases Quarterly Dividend by ~17% and Increases

Share Repurchase Authorization; Maintaining Buy

Our CallAfter the close yesterday, Brinker announced that the Company's Board of

Directors approved a quarterly dividend of $0.28 (yield of 2.3%), representing

an increase of ~17%. The Board also approved the authorization of an additional

$350 million for the Company's repurchase program, bringing the outstanding

authorization to $3.9 billion. We are maintaining our BUY rating on EAT given

strong free cash flow generation, improving casual dining industry trends and an

attractive valuation.

Dividend Increased from $0.24 to $0.28; Represents Increase of 16.7% andYield of 2.3%:The Company announced after the close yesterday that it wouldincrease its quarterly dividend 16.7% to $0.28 per share. While the dividend

growth was at a slower pace than the last two years (20% increase in 2013and 25% in 2012), we believe the dividend will likely increase at a faster pace

in FY16 and FY17 as the Company's free cash flow accelerates following the

completion of its remodel program. We are projecting ~$4.00+/share in free cash

flow in FY16 vs. ~$2.88 in FY15.

Casual Dining Industry Sales Slightly Better in Recent Weeks:Based onrecent channel checks and commentary from Malcolm Knapp (from July), we

believe casual dining industry same-store sales moved into positive territory in

late July and that improvement has continued into August. Thus far, in 2014,

every month has posted a decline in same-store sales, as measured by Knapp-

Track. However, we believe August has the potential to be the first month of

positive same-store sales growth since November 2013.

Valuation Attractive vs. Peers: Shares of Brinker are currently trading at

~15.8x consensus NTM EPS and ~8.5x NTM EBITDA. While multiples are

slightly above the 3-year historical average, the Company is currently trading at

a discount to peers such as CAKE (18.9x NTM EPS) and DRI (21.1x NTM EPS)

and the Company's valuation is the lowest out of our restaurant coverage list.

Companies mentioned:

The Cheesecake Factory Inc. (CAKE - $44.60 - Buy)

Darden Restaurants Inc. (DRI - $47.45 - Buy)

BuyEATPrice $48.67

Price Target $55.00

Restaurants

Lynne Collier(214) [email protected]

Wesley Carmichael(214) [email protected]

Company Data52-Week Range $38.40 - $55

Market Capitalization (M) $3,14Shares Outstanding (M) 6

Avg. Daily Vol. (000) 97

Estimates Q1 2015E 201

EPS 0.49 3.08 3

For the latest company report:

EAT Company Report

Any Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst CertificatiInvestment Banking, Ratings Definitions, and any potential conflicts of interest begin on Page I of the Appendix

Section. Past performance is no guarantee of future results.

800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
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APPENDIX SECTION

Company Description:Headquartered in Dallas, Texas, Brinker International, Inc. is a leading world-wide casual dining restaurant company. The company

owns, operates, and franchises restaurant brands under the names Chili's Grill & Bar and Maggiano's Little Italy. The Company owns

884 locations and franchisees operate 731 locations.

IMPORTANT DISCLOSURES:

Regulation Analyst Certification:I, Lynne Collier and Wesley Carmichael, hereby certify the views expressed in this research report accurately reflect my personal views

about the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly,

related to the specific recommendations or views expressed by me in this report.

Price Target Risks & Related Risk Factors:

Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve Sterne

Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect demand for a

company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or industry; intense

and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability to recruit and retain

competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could affect the market price of

a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities Exchange Commission.

Company Specific Risks:Investment risks include: slowing domestic economic growth; pressures on consumer spending and sentiment; increased competition,

particularly in the bar & grill segment of casual dining; and commodity and labor inflation.

Valuation Methodology:

Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry

size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and

expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry

or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings

multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflect

the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors.

Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.

Company Specific Valuation:Our price target of $55 assumes a multiple of ~18x our FY15 EPS estimate of $3.08.

Definition of Investment Ratings:

BUY:We expect this stock to outperform the industry over the next 12 months.

NEUTRAL:We expect this stock to perform in line with the industry over the next 12 months.

UNDERPERFORM:We expect this stock to underperform the industry over the next 12 months.

RESTRICTED:Restricted list requirements preclude comment.

Ratings Distribution:

IB Serv./ Past 12Mos.

Rating Category Count Percent Count Percent

Buy 264 50.38% 36 13.64%Neutral 246 46.95% 26 10.57%Underperform 14 2.67% 0 0.00%

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST:Contact Robert Hoehn at 1-212-338-4731.

Other Disclosures:

Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not

represent that it is accurate or complete, and it should not be relied upon as such. Past performance is no guarantee of future results.

Appendix Section, Page

August 22, 2014


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For UK Professional Clients

This research report is disseminated in the UK by Sterne Agee UK LLP which is authorized and regulated by the Financial Conduct

Authority. This research report is intended for distribution in the UK only to, and should be relied upon only by, persons who or may be

classified as eligible counterparties or professional clients pursuant to the FCA's rules or who are investment professionals as defined in

Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

Copyright 2014 Sterne, Agee & Leach, Inc. All Rights Reserved.

Appendix Section, Page I

August 22, 2014


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To receive price charts or other disclosures on the companies mentioned in this report that are not the subject of this report

which Sterne Agee continues to cover, please visit our website at https://sterneagee.bluematrix.com/sellside/Disclosures.actionor contact Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or (205) 949-3689.

Appendix Section, Page II

August 22, 2014
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Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the early years, our founders

prominently established themselves in the financial securities industry in the southeastern United States. Today, we have expanded to serve all regions of the country. SterneAgee is headquartered in Birmingham, Alabama. Sterne Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne AgeeGroup, Inc., which also includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee

Financial Services, Inc.www.sterneagee.com

EQUITYCAPITAL MARKETS

Ryan Medo Managing Dir., Eq. Cap. Mkts. (205) 949-3623

INSTITUTIONAL SALES

William Jump Director of Institutional Sales (404) 814-3960

Jon Schenk Assoc. Director of Inst. Sales (212) 763-8221

INSTITUTIONAL TRADING

JT Cacciabaudo Head of Trading (212) 763-82

EQUITYRESEARCHRobert Hoehn Director of Research (212) 338-4731

CHIEF ECONOMIST

Lindsey M. Piegza (312) 924-0607

TECHNICALANALYSIS &RESEARCH

Carter Braxton Worth (212) 338-4765

CONSUMER

Broadlines / Health & Wellness Retailing

Charles Grom, CFA (646) 376-5373

Renato Basanta, CFA (646) 376-5317

John Parke (646) 376-5315

Footwear & Apparel

Sam Poser (212) 763-8226

Ben Shamsian (212) 338-4721

Leisure & Entertainment

David Bain (949) 721-6651

Media & Entertainment

Vasily Karasyov (646) 376-5362

Restaurants

Lynne Collier (214) 702-4045

Wes Carmichael (214) 702-4004

Specialty Retail

Ike Boruchow, Jr. (212) 338-4756

Tom Nikic, CFA (212) 338-4784

ENERGY

Exploration & Production

Tim Rezvan, CFA (212) 338-4736

Truman Hobbs (212) 338-4767

Oilfield Services & Equipment

Stephen D. Gengaro (646) 376-5331

Ivan Suleiman (212) 338-4723

FINANCIAL SERVICES

Asset Management

Jason Weyeneth, CFA (212) 763-8293

Banks & Thrifts

Terry McEvoy, CFA (207) 775-4926

Erik Zwick, CFA (610) 260-9551

Austin Nicholas (207) 775-4394

Matthew Kelley (207) 699-5800

Matthew Breese (207) 699-5800

Brett Rabatin, CFA (615) 760-1466

Nathan Race (615) 760-1477

Peyton Green (615) 760-1464

Kenneth James (615) 760-1474

Maxwell Neely (615) 760-1468

Life Insurance

John M. Nadel (212) 338-4717

Specialty/Real Estate Finance

Henry J. Coffey, Jr., CFA (615) 760-1472

Jason P. Weaver, CFA (615) 760-1479

Calvin Hotrum (615) 760-1476

Property/Casualty Insurance

Dan Farrell (212) 338-4782

Nitin Chhabra, FCAS (212) 338-4779

HEALTHCARE

Health Insurance

Brian Wright (646) 376-5350

Medical Technology

Gregory P. Chodaczek (610) 260-9560

Pharmaceutical Services

Gregory Bolan (615) 760-1469

Michael A. Ward (646) 218-4829

Specialty and Generic Pharmaceuticals

Shibani Malhotra (646) 376-5396

Austin Nelson (646) 218-4839

INDUSTRIALS

Aerospace & Defense

Peter Arment (646) 376-5336

Josh W. Sullivan (646) 376-5337

Asher Carey (646) 218-4825

Aut o, Auto Par ts and Au to Retailers

Michael P. Ward, CFA (646) 376-5375

Ali Faghri (646) 376-5304

Coal, Metals & Mining , Engineering &Construction

Michael S. Dudas, CFA (646) 376-5329

Satyadeep Jain, CFA (646) 376-5357

Patrick Uotila, CPA (646) 376-5358

Construction Materials & DiversifiedIndustrials

Todd Vencil, CFA (804) 282-7385

Homebuilding

Jay McCanless (615) 760-1475

Annie Worthman (615) 760-1478

Water and Flow Control

Kevin Bennett, CFA (804) 282-4506

TECHNOLOGY

Data Networking and Storage

Alex Kurtz (415) 402-601

Amelia Harris (415) 402-601

Enterprise Software

Robert Breza (612) 360-755

Jean-Baptiste Jouve (917) 392-570

Interactive Entertainment / Internet

Arvind Bhatia, CFA (214) 702-400

Brett Strauser (214) 702-400

LED Supply Chain

Andrew Huang (415) 362-614

John Shen (415) 402-6052

Semiconductors

Vijay Rakesh (312) 525-843

Troy Cowdrey (312) 525-843

TRANSPORTATION,SERVICES &EQUIPMENT

Sal Vitale (212) 338-476

sterne agee on brinker - eat

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