UBS analysts are betting that Chili's sales momentum has more room to run, lifting their price target on parent company Brinker International to $260 from $190. The upgrade comes just days before Brinker is set to report its fiscal fourth-quarter results on Wednesday.
In a research note released Monday, UBS said investors are focused on Chili's same-store sales—a key retail metric that tracks sales at locations open at least a year. The bank expects those sales to climb roughly 5.5% to 6% in the quarter, with a chance that growth accelerates to the high-single digits early in fiscal 2027.
The new target implies significant upside from Brinker's recent trading levels, reflecting UBS's confidence that the casual dining chain's recent turnaround is not fading. Chili's has been a standout in the restaurant industry, benefiting from value-focused menu offerings and a successful marketing push that has drawn budget-conscious diners.
What's driving the optimism?
UBS's note suggests that many Wall Street forecasts for fiscal 2027 already assume steady gains: roughly 3% to 5% revenue growth and even faster profit expansion. The bank appears to believe those estimates could be too conservative if Chili's keeps its current trajectory.
Same-store sales growth is a crucial gauge for restaurant chains because it isolates performance from new store openings. A sustained run of positive same-store sales indicates that existing locations are attracting more customers or getting them to spend more—a sign of brand health that investors watch closely.
Chili's has been a bright spot in an otherwise mixed casual dining environment. While some competitors have struggled with softer traffic, Chili's has leaned into value deals and digital ordering, which have resonated with diners looking to stretch their budgets.
What it means for investors
For everyday investors, the UBS price target hike is a signal that at least one major bank sees more upside in Brinker's stock. However, it's important to remember that price targets are just one analyst's opinion, not a guarantee of future performance.
The upcoming earnings report on Wednesday will be the real test. If Chili's same-store sales come in at or above the 5.5% to 6% range UBS expects, it could validate the bank's bullish stance. A miss, on the other hand, could prompt other analysts to trim their own forecasts.
Investors should also consider the broader context. The restaurant sector has been navigating higher labor and food costs, and consumer spending has shown signs of softening in some areas. Companies like Wendy's have recently withdrawn their 2025 forecasts due to weak U.S. sales, highlighting the challenges facing the industry.
Still, Brinker's stock has been a standout performer, and UBS's revised target suggests the bank believes the rally can continue. For those who already own the stock, the note offers a reason to stay the course. For those considering a purchase, it's worth waiting to see what Wednesday's numbers reveal.
Looking ahead
Beyond the immediate earnings report, investors will be watching for any commentary from management about fiscal 2027 trends. UBS's expectation of high-single-digit same-store sales growth early in the year would be a strong signal that Chili's momentum is durable.
The bank also noted that many forecasts already bake in steady gains, which could mean there's room for upward revisions if the company beats expectations. That dynamic could provide additional fuel for the stock in the coming months.
For now, the focus is squarely on Wednesday's report. As with any earnings announcement, the market's reaction will depend not just on the numbers, but on the tone of management's guidance and how it compares to Wall Street's expectations.
In the meantime, investors might also keep an eye on other restaurant stocks for context. For example, Home Depot's contractor sales strength is a different sector, but it offers a glimpse into consumer spending trends that can indirectly affect dining out.
Ultimately, UBS's price target hike is a vote of confidence in Chili's turnaround. Whether that confidence is justified will become clearer when Brinker reports its results later this week.
