On Jul 17, Zacks Investment Research upgraded Cracker Barrel Old Country Store Inc. (CBRL) to a Zacks Rank #1 (Strong Buy) based on its upbeat outlook for the forthcoming quarter. Also, a splendid return of more than 60.0% over the past one year and an extremely solid dividend growth story make Cracker Barrel an attractive investment opportunity.
Why the Upgrade?
Management raised the lower-end of its comparable sales growth guidance from 2.0% to 2.5% for fiscal 2013 despite a weak consumer spending environment. This implies that Cracker Barrel expects a strong business environment for the upcoming quarter. Management also upped its operating margin and adjusted earnings guidance for fiscal 2013. Adjusted earnings per share are now expected in the range of $4.75 to $4.85, up from the previous guidance of $4.60 to $4.80.
Cracker Barrel continues to post positive earnings surprises. This leading restaurant chain delivered positive earnings surprises in the last 4 quarters with an average beat of 9.88%. In the last reported quarter, the company outperformed the Zacks Consensus Estimate by 7.37%. Also, the restaurateur tripled its dividend since Apr 2012.
On Jun 07, Cracker Barrel delivered solid third-quarter 2013 earnings where revenues grew 5.2%, thanks to higher traffic and positive comparable store sales (comps) growth at both restaurants and retail segments. Earnings took a further leap of 26% from the year-ago level buoyed by margin expansion. Cracker Barrel beat the Zacks Consensus Estimate on both counts.
The data also confirms Cracker Barrel’s bullish run. The company has been witnessing rising earnings estimates since it reported its third-quarter results. Over the past 60 days, the Zacks Consensus Estimate for 2013 and 2014 increased 2.1% and 2.4%, respectively as most of the estimates moved upward with no negative revision. The Zacks Consensus Estimate for 2013 and 2014 represents year-over-year increases of 5.45% and 15.45%, respectively.
The restaurateur is expected to report its fourth-quarter earnings on Sep 16, 2013. Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) of Cracker Barrel is +8.15%. In fact, the combination of the stock’s Zacks Rank #1 and +8.15% ESP makes us confident of an earnings beat this quarter.
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