Brinker International (EAT, Financial) saw its stock drop 14% despite reporting solid Q3 earnings. The company, which operates Chili's and Maggiano's, posted a 115% year-over-year increase in adjusted EPS to $2.66 and a 27.2% rise in revenue to $1.43 billion. Brinker also raised its FY25 EPS and revenue guidance.

• Q3 same-restaurant comps were impressive at +28.2% overall, with Chili's at +31.6% and Maggiano's at +0.4%. Chili's benefited from increased traffic, driven by advertising focused on value and guest trials, along with operational improvements.
• Restaurant operating margin (non-GAAP) improved to 18.9% from 14.2% a year ago, aided by higher sales. Brinker is excited about its new Big QP burger pack, which features 85% more beef than a quarter-pound burger, priced at $10.99 on the 3 for Me menu.
• Brinker aims to revitalize Maggiano's by simplifying and enhancing the menu and improving service levels. The company is also eliminating unprofitable discounting practices that don't align with the Maggiano's brand.

Despite the positive earnings report, Brinker's stock fell. The narrower EPS upside in Q3 compared to Q1 and Q2 might have disappointed investors. However, Chili's has been a standout performer, even as other chains struggle.

Streamlining the menu has improved efficiency for employees, and Brinker's 3-for-Me offering has become a value staple. Consumers are seeking value, and Chili's is meeting that demand effectively. While Brinker had been a laggard, it is now catching up.