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Estimates have been rising for Bob Evans Farms, Inc. (BOBE - Snapshot Report) after the company delivered better-than-expected results for the third quarter of its fiscal 2012 on February 14.

It is a Zacks #2 Rank (Buy) stock.

Based on consensus estimates, analysts expect 16% EPS growth this year, 8% growth next year, and 9% growth over the long-run. On top of this, the company pays a dividend that yields a stellar 2.6%.

Company Description

Bob Evans Farms, Inc. owns and operates 709 restaurants as of January 27, 2012, including 564 Bob Evans Restaurants in 18 states and 145 Mimi's Cafes in 24 states.

Bob Evans Restaurants are primarily located in the Midwest, mid-Atlantic and Southeastern United States, while Mimi's are mostly in California and other western states.

The company was founded in 1953 and is headquartered in Columbus, Ohio. It has a market cap of $1.1 billion.

Third Quarter Results

Bob Evans reported better-than-expected results for the third quarter of its fiscal 2012 on February 14. Earnings per share came in at 69 cents, beating the Zacks Consensus Estimate by 9 cents. It was a 35% increase over the same quarter last year.

Net sales were flat year-over-year at $428.3 million. Negative same-store sales at Mimi's was offset by same-store sales growth at Bob Evans Restaurants.

The gross margin did contract a bit due to higher commodity costs in the foods segment. But this was more than offset by a decrease in wages as a percentage of net sales.

The company also benefited from a lower tax rate in the quarter.

Outlook

Following solid Q3 results, management raised the lower end of its fiscal year 2012 EPS guidance from $2.36 to $2.38, and reaffirmed the upper end of $2.44.

This prompted analysts to raise their estimates for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy) stock.

The Zacks Consensus Estimate for 2012 is now $2.45, slightly above guidance, and representing 16% growth over 2011 EPS. The 2013 consensus estimate is currently 8% higher at $2.64.

Over the long run, management believes it has the "resources and programs in place" to deliver annual EPS growth in the 7-10% range. The 5-year consensus EPS growth rate among analysts is within this target at 9%.

Dividend

In addition to solid earnings growth, the company pays a dividend that yields a stellar 2.6%. Since 2000, the company has steadily increased its dividend at a compound annual rate of 9%:

BOBE: Bob Evans Farms, Inc.

Valuation

The valuation picture looks reasonable with shares trading at 15x 12-month forward earnings, in-line with industry median. Its price to cash flow ratio of 8 is also in-line with its peers.

The Bottom Line

With rising estimates, solid growth projections, a 2.6% dividend yield and reasonable valuation, Bob Evans offers investors attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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