Analyst raises rating on Chili's owner Brinker

NEW YORK (AP) -- The roll out of new menu items by Brinker International, which runs the Chili's chain, could boost sales and margins, according to Sterne Agee, which upgraded the company's shares Friday.

The Dallas company also owns the Maggiano's Little Italy chain and has a stake in Romano's Macaroni Grill.

Sterne Agee analyst Lynne Collier says that the new dishes being tested are likely to be rolled out in the first half of next year, serving as a potential sales driver. The food in some cases also delivers a higher margin, she said, noting in particular a pizza that is made with a new oven technology.

Brinker has worked in recent years to improve margins by cutting back on labor costs and upgrading its back-of-the-house technology. Chili's restaurants are also being modernized.

Collier believes Brinker should be able to "consistently generate 10 percent to 15 percent" per-share earnings growth, given the potential to accelerate sales in the second half of 2013 and beyond with new menu items.

Sterne Agee also addresses changes to national health care mandates, which could have an outsized effect on the restaurant industry in 2014. Collier notes that only about third of Brinker's employees will be working full time for the company, and only a third of those will likely opt for health care benefits.

Collier raised her ratings on Brinker International Inc. to "buy" from "neutral" and established a price target of $36.

Shares of Brinker International Inc. rose 7 cents to $31.66 in premarket trading.