Monro Muffler Brake, Inc.

The good news just keeps coming for Monro Muffler Brake, Inc. (MNRO - Snapshot Report). This Zacks #2 Rank (buy) reported record fiscal third quarter results in January. It is expected to grow earnings by the double digits in fiscal 2011 and fiscal 2012.

Monro Muffler thrived during the recession as more consumers fixed their cars instead of buying new ones.

The company operates a chain of automotive undercar repair and tire services stores in the United States under the brands Monro Muffler Brake, Mr. Tire, Tread Quarters Discount Tires, Autotire and Tire Warehouse.

The 782 stores provide a full range of services from steering and suspension systems, brakes and exhaust systems.

Is Monro Being Too Conservative?

On Jan 25, Monro beat both the Zacks Consensus Estimate and its previously announced forecasted range for the fiscal third quarter. Earnings per share were 35 cents per share.

Its range had been 29 to 33 cents and the consensus had been looking for 32 cents. The company also beat its guidance range in the previous quarter. Still, analysts appear content to put estimates in the company's range as Monro has surprised on the estimate 7 quarters in a row.

Record Sales

Sales jumped 8.4% in the third quarter to a record $165.5 million compared to $152.7 million a year ago.

Comparable store sales climbed 5.4% but that was under the 7.2% increase from the year before. Tires and shocks saw the most growth, as sales rose 8% and 7% for those two, respectively.

Gross margin also rose to 39.1% from 38.3% in the year ago quarter mainly due to price increases, increased vendor rebates, improved labor productivity and the leveraging of distribution and occupancy costs against higher sales.

Outlook for Fiscal 2011

The company continues to see strong customer traffic to maintain older cars.

It expects fiscal 2011 same store sales growth to be in the range of 4.5% to 5.5%. Over the past decade, it has increased same store sales every year.

Earnings per share are expected in the range of $1.41 to $1.45. The company made just $1.07 in fiscal 2010.

Since the results, analysts have raised estimates to be in line with the company's guidance. The fiscal 2011 Zacks Consensus Estimate has jumped 5 cents to $1.43 per share.

Analysts expect earnings to grow 33.5% in 2011 and another 18.8% in fiscal 2012.

The price and consensus chart for the last 5 years shows the steady growth in earnings which is what an investor wants to see.

Monro Takes Care of Its Shareholders

In Nov 2010, Monro announced it was raising its dividend by 33%.

It has raised its dividend 5 times in the last 5 years. That is an impressive track record given the great recession and that many companies were cutting, not raising, dividends during that time.

Currently, the dividend is yielding 1%.

MNRO's Attractive Fundamentals

Monro's shares aren't cheap. It is trading with a forward P/E of 22. But given its earnings growth, it has a PEG ratio of 0.9, which means it has some value.

The company also has a stellar 1-year return on equity (ROE) of 17.2%.

Monro is scheduled to report fourth quarter results on May 26. Can it beat for the 8th straight time?

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

Read the full analyst report on MNRO