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Cracker Barrel (CBRL) Q4 Earnings: Disappointment in Store?

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Restaurant chain, Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) , is scheduled to report fourth-quarter fiscal 2017 numbers on Sep 13, before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 5.98%. In fact, the bottom line surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 4.63%.

Let’s see how things are shaping up for this announcement.

Cracker Barrel Old Country Store, Inc. Price and EPS Surprise


Factors at Play

Cracker Barrel’s distinctiveness in the restaurants space lies in the fact that apart from serving food, its restaurant establishments also have old-country feel along with unique gift shops.

However, after posting 11 consecutive quarters of positive comps, the company’s comps decreased in the fiscal third quarter. The decline was due to the challenging macro environment coupled with higher promotional activity despite marketing programs and additional advertising expenses. In fact, the same is expected to have continued into the to-be-reported quarter as well. For the fiscal year, the company now projects comparable store restaurant sales to be flat to up 0.5% compared with the previous guided range of 0.5% to 1%.

Moreover, management notes that Cracker Barrel’s retail business has been under pressure, given the challenges faced by the retail industry, as a whole.

Notably, though the company has grown its offerings to target a younger demographic and is focusing on new product assortments, management believes that the fiscal fourth quarter’s comparable retail sales are likely to remain under pressure. Comparable store retail sales are expected to decline roughly 3.5% for the fiscal year, which reflects the company's more cautious expectation for the fiscal fourth quarter.

Meanwhile, a soft consumer spending environment in the U.S. restaurant space might continue to affect traffic.

Nevertheless, the company’s focus on improving guest experience, menu innovation, promotional offerings, excellent operations execution are expected to positively impact comps in the quarter.

Furthermore, the return of Cracker Barrel’s widely popular Campfire Meals promotion in the fiscal fourth quarter is expected to drive incremental sales.

The company expects earnings per share in the fiscal fourth quarter to be in the range of $2.10-$2.20. Additionally, management anticipates Cracker Barrel’s cost saving initiatives, commodity costs favorability and growth of its off-premise business to further drive the quarter’s results.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Cracker Barrel this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Cracker Barrel has an Earnings ESP of -1.23%. This is because the Most Accurate estimate is $2.15 while the Zacks Consensus Estimate is pegged at $2.18. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cracker Barrel currently has a Zacks Rank #4 (Sell).

As it is we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that investors may consider, as our model shows that they have the right combination of elements to post earnings beat this quarter:

Accenture plc (ACN - Free Report) has an Earnings ESP of +0.66% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

H.B. Fuller Company (FUL - Free Report) has an Earnings ESP of +1.83% and a Zacks Rank #2.

CarMax Inc. (KMX - Free Report) has an Earnings ESP of +1.24% and a Zacks Rank #2.

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