Texas Roadhouse’s third quarter results were met with a negative market reaction, as revenue outpaced Wall Street expectations but earnings per share fell short. Management attributed the strong sales growth to higher guest traffic and a robust consumer response to menu items, particularly steaks and larger entrees. However, rising beef costs and ongoing commodity inflation pressured margins, with CEO Jerry Morgan noting, “Inflation in the third quarter was above our expectation due to higher-than-anticipated beef prices in the back half of the quarter.” The company also highlighted continued investments in technology and expansion across all three brands, but acknowledged the margin headwinds from commodity and labor expenses.
Is now the time to buy TXRH? Find out in our full research report (it’s free for active Edge members).
Texas Roadhouse (TXRH) Q3 CY2025 Highlights:
- Revenue: $1.44 billion vs analyst estimates of $1.43 billion (12.8% year-on-year growth, 0.7% beat)
- Adjusted EPS: $1.25 vs analyst expectations of $1.28 (2.2% miss)
- Adjusted EBITDA: $149.6 million vs analyst estimates of $152.9 million (10.4% margin, 2.2% miss)
- Operating Margin: 6.7%, down from 8% in the same quarter last year
- Locations: 806 at quarter end, up from 772 in the same quarter last year
- Same-Store Sales rose 6.3% year on year (8.2% in the same quarter last year)
- Market Capitalization: $11.09 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Texas Roadhouse’s Q3 Earnings Call
- Sara Senatore (Bank of America) asked about the drivers behind high beef inflation and ongoing negative alcohol mix. CFO Michael Bailen explained that beef inflation is largely cyclical and that negative alcohol mix is being partially offset by stronger sales of mocktails and soft beverages.
- Gregory Francfort (Guggenheim) questioned the potential for beef inflation to become a structural issue. Bailen responded that current inflation is believed to be cyclical, although some structural elements could remain if prices persist at elevated levels.
- Jacob Aiken-Phillips (Melius Research) inquired about consumer trends by income or age cohort. CEO Jerry Morgan and Bailen indicated no significant differences, attributing traffic growth to perceived value and menu flexibility across demographics.
- David Tarantino (Baird) pressed management on whether they would allow restaurant profit dollars per location to decline for a second consecutive year. Morgan reaffirmed the company’s conservative pricing philosophy and focus on long-term margin protection, with decisions involving input from local operators.
- Peter Saleh (BTIG) asked about the percentage of beef costs locked for next year and the operational benefits of the digital kitchen rollout. Bailen stated that about 40% of the commodity basket is locked for the first half of the year and highlighted that the digital kitchen system improves guest experience and operational efficiency without sacrificing service quality.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will be monitoring (1) the trajectory of commodity and wage inflation and Texas Roadhouse’s ability to offset these pressures through pricing and operational efficiency, (2) the pace and performance of new store openings and franchise acquisitions across its brands, and (3) the rollout and impact of digital kitchen and guest management systems on both guest experience and cost structure. Additional drivers include continued momentum in retail product distribution and the response of guests to further menu innovation.
Texas Roadhouse currently trades at $167.12, up from $160.66 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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