Texas Roadhouse reported a top and bottom line beat in its fourth quarter with strong comparable sales growth and margin improvement. Although the first seven weeks of the first quarter are off to a noisy start due to inclement weather, this short-term headwind creates a long-term opportunity. Revenue in the quarter ended Dec. 31 increased 23.5% year over year to $1.44 billion, exceeding the LSEG-complied Wall Street consensus estimate of $1.41 billion. Earnings per share (EPS) increased 60% to $1.73, ahead of the $1.64 expected. Why we own it Why we own it: Texas Roadhouse is a fast-casual steak chin that offers quality food at an affordable price in a fun atmosphere, creating one of the more compelling value propositions for consumers in the full-service dining category. A substantial majority company’s stores are company-owned stores, with only a small proportion as franchise locations. Competitors: Darden Restaurants (Olive Garden, LongHorn Steakhouse), Brinker International (Chili’s and Maggiano’s), Bloomin Brands (Outback, Carrabbas Italian Grill, BonefishGrill) Portfolio weighting: 1.16% Most recent buy: 2/7/2025 Initiated: 2/4/2025 Bottom Line Texas Roundhouse ended 2024 on a high note with strong growth and profitability. An increase of 7.7% in comparable store sales, or comps, was better than what analysts estimated, and it was driven by a healthy blend of 4.9% traffic growth and a 2.8% bump in average check totals. The traffic shows more people are dining at the restaurants owned by the company, which also include casual dining chains Bubba’s 33 and Jaggers. The average check increase shows how much they are spending. Texas Roadhouse has figured out how to strike a great balance between maintaining its value proposition with only incremental price increases, explaining why customers are so loyal to the chain. The comp growth was relatively consistent throughout the quarter, with a monthly cadence of 8.3%, 6.9%, and 7.9% for October, November, and December, respectively. But trends got noisy in the new year. The company said Thursday evening that its comparable restaurant sales for the first seven weeks increased 2.9% compared to 2024. This is a big step down from Q4 but don’t be alarmed. The brand isn’t struggling because of something internal. There are a lot of external factors impacting sales, which management did a good job explaining on the post-earnings conference call. The first four weeks of January were pretty good with comps up 5.5% which included a 1 percentage point benefit from New Year’s Day being included in 2025 comps and not 2024, but they were also negatively impacted by a 2 percentage point headwind from snow causing store delays or closures. Backing these out, Texas Roadhouse was looking at comps in the mid to high single digits. In the most recent three weeks, the environment has been tough – with comps flat year over year – due to Valentine’s Day shifting to a different day and, of course, the cold weather that swept across the country. In total, the company is “conservatively estimating” a 1.5 percentage point negative impact to the reported seven-week period from calendar shifts and store closures, without including the impact of cold weather which obviously hurts sales too. When the weather is cold with rain or snow, people prefer to eat at home instead of dining out. What does this all mean? Although the company’s comp update may seem like a disappointment, one look at the stock chart tells you the market knew this was coming. TXRH 1Y mountain Texas Roadhouse 1 year Shares have pulled back roughly 5% since the start of February, essentially tracking the sales slowdown. But with the weather likely to improve from here and management confident in positive traffic growth for the rest of the year, we think this recent weakness creates a long-term buying opportunity as indicated by our 1 rating. We’re also reiterating our $205 per share price target, which is just shy of the stock’s all-time high from back in November. Following an initial modest decline Thursday evening, Texas Roadhouse shares reversed higher by 2% in after-hours trading to above $175. Commentary Texas Roadhouse owns a substantial majority of its stores versus franchise locations. And, on the first day of the 2025 fiscal year, it completed a deal to acquire 13 domestic franchises. We like to see Texas Roadhouse use its cash on hand to acquire franchises because it gives the company more control over everything in its restaurants. No wonder its company-owned stores are outperforming the franchise-owned ones. In 2025, the company expects approximately 30 company restaurant openings across its three brands, seven international franchise Texas Roadhouse openings, and three domestic franchise Jaggar’s openings. They also expect to relocate as many as nine of their higher-performing Texas Roadhouse restaurants to new larger locations with more parking. We think the company has the capacity to accelerate new store openings if it wants to, but management prefers a 25 to 30 cadence to ensure its new stores make a great first impression. Their longer-term U.S. target for Texas Roadhouse restaurants is still 900, up from the more than 650 locations currently. As for cash returns, the company announced an 11% quarterly dividend hike to 68 cents per share. At a stock price of $170 per share, around where it closed in Thursday’s regular trading session, the new yield increases to about 1.6%. The company’s board also approved a new share repurchase program of up to $500 million worth of stock. This new program replaces the previous program which was worth $300 million. Guidance For 2025, management reaffirmed most of its outlook. They continue to expect positive comparable restaurant sales growth, including the benefit of last year’s menu pricing actions, store-week growth of approximately 5%, including a benefit of 2% from franchise acquisitions, wage and other labor inflation of 4% to 5%, a 15% to 16% effective tax rate, and total capital expenditures of $400 million. But there was one slight outlook tweak. Management now expects commodity cost inflation to be in the range of 3% to 4%, up from its previous outlook of 2% to 3%. The main driver of the change in guidance was updated cattle supply expectations, which are expected to be tighter in the back half of 2025 than originally anticipated. The company’s margins are highly sensitive to beef prices since this is a steakhouse chain. This could pressure margins in the quarters ahead, but an offset of these higher costs will be the announced 1.4% increase in menu prices that go into effect in early April. Despite the price hike, the company is confident the level of pricing maintains its everyday value. (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. 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Texas Roadhouse reported a top and bottom line beat in its fourth quarter with strong comparable sales growth and margin improvement. Although the first seven weeks of the first quarter are off to a noisy start due to inclement weather, this short-term headwind creates a long-term opportunity.