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Bull of the Day: Cracker Barrel Old Country Store (CBRL)

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Cracker Barrel Old Country Store (CBRL - Free Report) is a Zacks Rank #1 (Strong Buy) that is engaged in the ownership and operation of full-service restaurants with a restaurant and a retail store in the same unit. Their popular signs can be seen all over the country when one takes a road trip on America’s highways.

2022 has not been kind to the stock, which is down over 25%. Additionally, the stock is off over 45% from its 2021 highs. So, is now the time to buy?

A recent earnings beat was not initially good enough for investors, causing the stock to traded lower. However, the stock came off its post-earnings lows as analysts raised estimates. Investors should watch this one closely as the overall stock market tries to find its footing.  

About the Company

Cracker Barrel was founded in 1969 and is headquartered in Lebanon, TN. The company operates over 650 stores in 45 states and has a market cap of $2 Billion.

The company aims to provide an environment that has a friendly home-away-from-home feel. They provide home-style meals and a retail shop that offers unique gifts and self-indulgences.

The stock has Zacks Style Scores of “B” in Value and “A” in Momentum. The stock also pays a hefty 5.4% dividend.  

Q4 Earnings Beat

On September 27th, the company reported an earnings beat of 14%. Revenues came in below expectations, but the company guided initial FY23 revenues up 7-8%.

Comparable restaurant sales were up 6.1%, while operating income margin ticked up to 4.4% from 4.3% last quarter.

A couple negatives in the guidance was commodity inflation +8% and wage inflation +5%. These will add to cost pressures but management seemed optimistic, with the CEO saying:

“Despite the high levels of commodity inflation, we faced throughout the year, we kept a long-term focus and invested to retain a position of value leadership through a thoughtful combination of pricing strategy and menu design, despite the short-term impact on margin. Our commitment to value and in delivering a great guest experience helped us weather a weaker than expected summer travel season, gas prices that exceeded expectations, and historic inflationary pressures on the consumer, and we were encouraged by better traffic and sales trends in the final few weeks of the quarter. I believe our focus on delivering a compelling value and experience to our guests, coupled with our cost savings programs, investments in technology, and strategies to attract a broader group of guests, position us well for fiscal 2023 and beyond, particularly when inflationary pressures eventually ease.”

Analyst Estimates

Since the earnings report, analysts estimates have ticked higher for the current quarter. Over the last 7 days, estimates have gone from $1.04 to $1.12, or 7%.

For the current year, estimates have gone up 5% over that same time frame, from $6.06 to $6.35.

If you look on a lager time frame, estimate have gone up over the last 90 days. For next year, we see a 5% gain, with the number going from $6.18 to $6.51.

While commodity inflation has hurt margins, some analysts are making the case that the recent fall in commodities could help improve margins next year.

The Technicals

When looking at the charts, there is not much to like. The stock is below all the moving averages, with the 50-day MA at $104 and the 200-day at $111. Until the bulls push price over those levels, the bears are in control.

However, the stock does have a nice dividend, so some investors are very interested in current levels.

The recent pullback has fallen into a 61.8% Fibonacci retracement drawn from June lows to recent highs. This buy zone seems to be an area of interest and if it holds, could start a move back above $100.

Bottom Line

The current market atmosphere is not the best for investors. However, there are stocks that are approaching buyable levels. Watch support zones for buyers and if the levels hold up, it could be a great buying opportunity.

Cracker Barrel presents one such opportunity, especially if the market can gain some footing into the end of the year


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