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Cracker Barrel Down 9% in 6 Months: What's Hurting the Stock?

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Despite undertaking several sales building and cost-saving initiatives, Cracker Barrel Old Country Store, Inc. CBRL has failed to impress investor. The company’s shares have declined 8.9% in six months against the industry’s rise of 3.5%.

Additionally, the company’s VGM Score of C and downward estimate revision over the past 30 days make analysts skeptical about its growth potential. Let’s delve deeper and try to assess what’s taking this Zacks Rank #5 (Strong Sell) company down.

Soft Q4 Results

Investors’ apprehensions about the company increased after it missed the Zacks Consensus for earnings and revenues in fourth-quarter fiscal 2018. Earnings missed the consensus mark after beating the estimate over the past several quarters. Meanwhile, revenues missed the estimate in the seven out of eight quarters. Adjusted earnings of $2.19 per share lagged the Zacks Consensus Estimate of $2.66 by 17.7%. Moreover, quarterly revenues of $810.9 million fell shy of the consensus estimate of $820.7 million.

Estimates Trending Downward

Following lower-than-expected fourth-quarter 2018 results, analysts have slashed estimates. In the past 30 days, the Zacks Consensus Estimate for fiscal 2019 and 2020 earnings has moved down by 5.6% and 6% to $8.86 and $9.21, respectively. Moreover, the consensus mark for first-quarter fiscal 2019 declined by 17.7% to $1.91, reflecting analyst’s concern over the stock’s potential.

Rising Costs a Major Concern

Cracker Barrel is bearing the brunt of escalating labor costs due to increased wages. In the fourth quarter of 2018, the company’s earnings declined 1.8% year over year on increased labor expenses. In fact, the company expects this cost-push inflation to persist in the near term. Moreover, expenses for opening of units are expected to continue denting margins.

The company’s high vulnerability to the inconsistent nature of consumer discretionary spending add to the woes.

Stocks to Consider

Some better-ranked stocks in the industry are BJ's Restaurants, Inc. BJRI, Dine Brands Global, Inc. DIN and Good Times Restaurants Inc. GTIM, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BJ's Restaurants has an expected current-year earnings growth rate of 50.35%.

Dine Brands Global has an expected earnings growth rate of 127.03% for the next quarter.

Good Times Restaurants reported better-than-expected earnings in the last four quarters, the average beat being 95.54%.

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