Texas Roadhouse’s second quarter saw double-digit revenue growth, but the market reacted negatively as higher costs weighed on profitability. Management highlighted robust traffic growth across all three brands and expanding unit count as drivers of topline momentum. CEO Jerry Morgan noted, “Strong traffic growth throughout the quarter drove a 5.8% increase in same-store sales.” Despite this, persistent commodity inflation, particularly in beef, and slightly higher labor costs limited margin expansion, which management described as a key challenge for the quarter.

Is now the time to buy TXRH? Find out in our full research report (it’s free).

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 Q2 Earnings Call

• Sara Harkavy Senatore (Bank of America) asked about the drivers and timing of beef inflation. Head of Investor Relations Michael Bailen highlighted strong retail demand and tighter supply as the main factors, with most beef supply for Q3 already locked in.
• David Sterling Palmer (Evercore ISI) inquired about the persistence of negative mix and labor leverage. Bailen explained that negative mix is limited to alcohol, while labor leverage benefited from higher traffic and improved staff retention.
• David E. Tarantino (Baird) asked about the impact of accelerating Bubba’s 33 openings on overall growth. CEO Jerry Morgan indicated that the enterprise could see slightly higher than 30 annual new units due to Bubba's expansion.
• Anisha Datt (Barclays) questioned the evolution of value-oriented sales and plans to emphasize value offerings. Morgan described the company’s menu as inherently value-driven, with features like early dine and $5 beverage options supporting guest choice.
• Gregory Ryan Francfort (Guggenheim) probed the sustainability of the company’s long-term margin target amid inflation. Morgan reaffirmed the goal of 17-18% restaurant margins but acknowledged that achieving this depends on commodity cycles and operational discipline.

Catalysts in Upcoming Quarters

Looking to the coming quarters, the StockStory team will be monitoring (1) the trajectory of beef and other commodity inflation and its impact on margins, (2) the effectiveness of the planned menu price increase in maintaining guest value perception and offsetting costs, and (3) the pace and profitability of new Bubba’s 33 and Jaggers openings. Additionally, execution on digital ordering and off-premise sales will be key markers of operational progress.

Texas Roadhouse currently trades at $174, down from $185.04 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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