Morgan Stanley: Margin Gains 'Baked In' For Brinker International

Brinker International, Inc. (NYSE: EAT) will post continued growth in same-store sales for the recent period, but improving margins are already "baked into" its share price, an analyst said recently.

Ahead of its second-quarter earnings expected Wednesday, Morgan Stanley's John Glass maintained an Equal-Weight rating on the owner of the Chili's Grill & Bar and Maggiano's Little Italy restaurant brands.

Glass said investors widely expect the company's profit margins will improve on lower food costs as well as the payoff from investments in technology.

The company's plan to widen its margin by 400 basis points is 80 percent complete, according to Glass.

The key to an upside to that plan is whether sales accelerate faster than expected, Glass said.

Brinker has said it expects 2015 earnings between $3 and $315 a share, and Glass said as long as hits second-quarter targets for margin expansion "we don't see a risk to these numbers."

Glass expects second-quarter operating margin will widen by 50 basis points.

Analysts on average are predicting second-quarter profits of $0.68 a share for the second quarter, on revenue of $733.55 million, along with same-store sales growth of 3.5 percent.

Same-store sales in the quarter ended September 24 grew 2.4 percent including 2.6 percent at company owned Chili's restaurants and 0.6 percent at Maggiano's restaurants.