I purchased 40 shares of Texas Roadhouse for about $174. After a recent deal, Jim Kramer’s Charitable Trust now holds 490 shares in TXRH, bumping its stake from 2.17% to around 2.35%. I decided to buy during a post-profit dip, adding half of the 80 shares that had sold for approximately $190 back in May, and I adjusted my rating to 1. The results were quite positive, with comparable sales jumping to 5.8% from the first quarter to the second. The third quarter is also starting strong, with comps increasing by 5.3% in the first five weeks.
However, the quarter wasn’t without its challenges. The company’s management faced rising costs, leading to an updated outlook on product cost inflation, which is putting pressure on restaurant margins. Analysts have subsequently revised down their earnings per share (EPS) predictions for 2025 and 2026. Consequently, negative revenue adjustments might affect stocks on Friday.
Beef inflation continues to be a concern—there’s really no escaping it. Consumers are feeling the pinch, and while the product prices are higher, there’s also a demand for alternatives. Interestingly, there’s a significant push expected next year to bolster the cattle herd, capitalizing on product strength. As expectations have moderated, stock adjustments have occurred, shifting attention back to robust store sales. Texas Roadhouse’s strong performance in this area indicates its popularity, and despite menu price strategies and economic uncertainties, diners still seem eager to eat out.
The company maintains consistent mid-single-digit comp growth. Notably, it seemed less aggressive with its stock buyback program in the second quarter, opting instead to save cash to acquire a franchise location. Plus, it appears Texas Roadhouse is gearing up for a significant expansion plan, targeting unit growth in 2026, with management hinting at around 30 new locations next year. This is encouraging news.
Even with these ambitious plans, there’s an expectation for management to be tactical given the current stock situation, similar to its approach in the first quarter. Jim Cramer’s charitable trust is invested long in TXRH, and those in the CNBC Investing Club receive alerts before Jim makes any trades. He typically waits 45 minutes post-alert before executing any buy or sell transactions, and if he mentions stocks on CNBC, he holds off for 72 hours afterward before acting on trades. The club’s guidelines are governed by specific terms, and no guarantees of outcomes are provided.
