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Cracker Barrel (CBRL) Down 11.3% Since Last Earnings Report: Can It Rebound?

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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 lost about 11.3% in that time frame, underperforming the S&P 500.

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

Cracker Barrel Q1 Earnings & Revenues Surpass Estimates

Cracker Barrel reported better-than-expected results for the first quarter of fiscal 2019.

Adjusted earnings of $1.96 per share surpassed the Zacks Consensus Estimate of $1.91 by 2.6%. Earnings increased 2.1% year over year on marketing efforts and increased revenues.

Revenues of $733.5 million surpassed the consensus mark of $717 million. Moreover, revenues increased 3.3% from the prior-year quarter, driven by higher comparable store retail and restaurant sales.

Comps Details

Comparable store restaurant sales increased 1.4% in the reported quarter buoyed by a 3% uptick in average check, partially offset by a 1.6% fall in comparable store restaurant traffic. The average menu price rose about 2% in the reported quarter. In fact, comps compared favorably with the fiscal fourth quarter’s 0.5% decline.

Comparable store retail sales in the first quarter increased 4.3%, better than the1.3% improvement recorded in the fourth quarter.

Operating Highlights

Operating income in the first quarter was $61.7 million, showing a decline from the year-ago quarter’s $70.8 million. Operating margin in the reported quarter was 8.4%, down 160 basis points (bps) from 10% a year ago.

As a percentage of total revenues, the cost of goods and labor expenses increased 60 bps and 30 bps, respectively. Moreover, the company witnessed a rise in other operating, and general and administrative expenses.

Balance Sheet

As of Nov 2, 2018, cash and cash equivalents were $101.6 million, down from $120.2million as of Oct 27, 2017 (end of first-quarter fiscal 2017). Long-term debt remained at $400 million in the quarter, flat with the prior-year quarter.

Inventory at the end of the quarter amounted to $181.6 million, down from first-quarter fiscal 2017 value of $191.5 million.

Cash flow from operating activities was $59.6 million as of Nov 2, 2018, compared with $38.3 million as of Oct 27, 2017.

In the fiscal first quarter, Cracker Barrel announced a quarterly dividend of $1.25 per share on the company's common stock. The dividend is payable on Feb 5, 2019, to shareholders of record as of Jan 18, 2019.

Fiscal 2019 Guidance

The company expects total revenues of $3.04 billion. Comparable store restaurant sales and retail sales are expected to remain flat or rise up to 1%. The company also aims to open eight stores in fiscal 2019.

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

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Cracker Barrel has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Cracker Barrel has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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