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Why Is Cracker Barrel (CBRL) Up 9.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Cracker Barrel Old Country Store (CBRL - Free Report) . Shares have added about 9.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cracker Barrel due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Cracker Barrel Q4 Earnings Miss Estimates

Cracker Barrel reported fourth-quarter fiscal 2018 results, wherein both top and bottom lines lagged analysts’ expectations.

Adjusted earnings of $2.19 per share missed the Zacks Consensus Estimate of $2.66 by 17.7%. Earnings also declined 1.8% year over year on increased labor expenses.

Quarterly revenues of $810.9 million lagged the consensus mark of $820.7 million by 1.2%. Revenues, however, increased 1.3% (when adjusted for the 53rd week) from the prior-year quarter, driven by higher comparable store retail sales.

The company witnessed softer sales trend in May that persisted through the fiscal fourth quarter. Store traffic was affected during the reported quarter and promotional initiatives could not drive its top line as was expected.

Comps Details

Comparable store restaurant sales declined 0.4% in the reported quarter due to 3.5% fall in comparable restaurant traffic, partially offset by 3.1% increase in average check. Comps compared unfavorably with the fiscal third quarter’s 1.5% increase. Notably, the average menu price increase was close to 2.7%.

Comparable store retail sales in the fiscal fourth quarter increased 1.3%, better than 0.9% improvement recorded in the fiscal third quarter.

Operating Highlights

Operating income in the fiscal fourth quarter was $82.8 million, indicating a fall from the year-ago quarter’s figure of $83.2 million. Resultantly, operating margin in the reported quarter was 10.2%, down 100 basis points (bps) from 11.2% a year ago.

As a percentage of total revenues, the cost of goods and labor expenses increased 110 bps and 70 bps, respectively. However, the company witnessed reductions in other operating, and general and administrative expenses.

Balance Sheet

As of Aug 3, 2018, cash and cash equivalents were $114.7 million, down from $161 million as of Jul 28, 2017 (end of fourth-quarter fiscal 2017). Long-term debt remained $400 million in the fiscal fourth quarter, flat with the prior-year quarter value.

Inventory at the end of the fiscal fourth quarter amounted to $156.3 million, nearly flat compared with the fourth-quarter fiscal 2017 value.

Cash flow from operating activities as of Aug 3, 2018, was $330.6 million compared with $320.8 million as of Jul 28, 2017.

In the fiscal fourth quarter, Cracker Barrel announced a quarterly dividend of $1.25 per share on the company's common stock. The dividend is payable on Nov 5, 2018, to shareholders of record as of Oct 19, 2018.

Fiscal 2018 Highlights

Cracker Barrel reported total revenues of $3.0 billion for fiscal 2018, up 3.6% year over year. Comparable store restaurant sales increased 0.6%, favored by a 2.5% increase in average check, partially offset by a 1.9% decrease in store traffic. Comparable store retail sales were down 0.1% for the fiscal.

Adjusted EPS was $8.87 per share in the fiscal.

Fiscal 2019 Guidance

The company expects total revenues to be $3.04 billion. Comparable store restaurant sales and retail sales are both assumed to remain in the range of flat to up 1%. The company aims to open eight stores in fiscal 2019.

Management projects earnings per diluted share for fiscal 2019 of $8.95-$9.10 compared with EPS of $8.87 in fiscal 2018.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -17.64% due to these changes.

VGM Scores

Currently, Cracker Barrel has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Cracker Barrel has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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