Texas Roadhouse: Why The Stock Didn't Drop On A 25% EPS Decline

2026-02-20 12:43:31 ET

Introduction

Texas Roadhouse ( TXRH ) is off to a great start this year, having gained 10% in less than two months. Surely, as investors rotate out of the AI hyperscalers and software companies, they realize that beef is here to stay and that no AI can yet replicate the juicy taste of a nice steak. The stock has been part of my portfolio since late 2022, when I bought it at $90 during the inflation-driven dip. Since then, I followed it and have often discussed how we should not assess the company only depending on the outlook for beef prices. In fact, Texas Roadhouse is much more than a beef "pass-through", so to speak. It is a restaurant chain that has built a trustworthy relationship with its customers (have you ever noticed how packed TXRH's restaurants are?), which makes the company willing to take a short-term margin hit when input costs rise so that its customers keep perceiving the value they get and keep returning. Then, Texas Roadhouse applies gradual price increases that mitigate the impact of inflationary pressures. This means that the company has a clear focus on what is temporary and what needs to last longer. Commodities are volatile and can be managed. Customers need to be conquered and kept, which means that trust and value are the real goods that Texas Roadhouse wants to deliver. This is why I used last year's dip to increase my stake in this company, since I believed that fears about high beef prices were temporary, while customer loyalty is an asset that would keep fueling the company's growth story....

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