Cracker Barrel (CBRL) Beats On Q3 Earnings, Raises EPS View

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) reported better-than-expected third-quarter fiscal 2018 results.

Earnings of $2.03 per share surpassed the Zacks Consensus Estimate of $1.93 by 5.2%. Earnings also increased 4.1% year over year due to a shift in the company’s marketing, favorable general and administrative expenses, and increased revenues.

Quarterly revenues of $721.4 million surpassed the consensus estimate of $715.2 million by 0.9% and grew 3% from the prior-year quarter. Revenues were favored by positive comps and restaurant openings.

Shares remained static in after-hours trading, following the earnings release on May 22. However, Cracker Barrel’s shares have rallied 6.9% in the past six months outperforming the industry’s rally of 1.6%.

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

While the company’s sales building initiatives favored comps growth and the overall top line, expenses related to the implementation of these initiatives and commodity inflation remain a concern for the company.

Let’s delve deeper into the numbers.

Comps Details

Comparable store restaurant sales increased 1.5% in the quarter, including a 2.8% increase in average check, partially offset by a 1.3% decrease in store traffic. The figure compared favorably with 1.1% increase in second-quarter fiscal 2018. Notably, the average menu price increase was close to 2.5%.

Comparable store retail sales in the fiscal third quarter increased 0.9%, slightly better than the 0.5% improvement recorded in the fiscal second quarter.

Operating Highlights

Operating income in the third quarter was $63.3 million, indicating a fall from the year-ago quarter’s figure of $71.5 million. Resultantly, operating margin in the reported quarter was 8.8%, down 140 basis points from 10.2% a year ago.

Net income was $48.7 million in the quarter, reflecting a 3.8% increase from the prior-year quarter’s net income of $46.9 million.

Balance Sheet

As of Apr 27, 2018, cash and cash equivalents were $174.3 million, down from $183.7 million as of Apr 28, 2017 (end of first-quarter fiscal 2017). Long-term debt remained $400 million in the third quarter, flat with the prior-year quarter value.

Inventory, at the end of the third quarter, amounted to $157 million, up from $155.5 million in third-quarter fiscal 2017.

Cash flow from operating activities as of Apr 27, 2018 was $221 million compared with $203.1 million as of Apr 28, 2017.

In the third quarter, Cracker Barrel announced that it increased the quarterly dividend to $1.25 per share on the company's common stock, reflecting a 4.2% increase from the company's previous quarterly dividend of $1.20. The quarterly dividend is payable on Aug 6, 2018 to its shareholders of record on Jul 13, 2018.

Also, management declared a special dividend of $3.75 per share on the company's common stock. The special dividend is payable on Aug 3, 2018 to its shareholders of record on Jul 13, 2018.

Fiscal 2018 Guidance

For fiscal 2018, the company expects adjusted earnings per share in the range of $10.35-$10.45, up from the previous band of $9.30-$9.50.

Total revenues are expected to roughly come in at $3.1 billion, reflecting the anticipated opening of eight or nine new Cracker Barrel stores, and three new Holler & Dash Biscuit House restaurants. The company maintained its previous revenue guidance.

The guidance also takes into consideration a projected increase in comparable store restaurant sales of 1-2% (same as previously announced). Comparable store retail sales are expected to remain flat as before.

Operating margin, as a percentage of revenues, is expected to be 9.5%, down from the previously guided range of 9.5-10%. Capital expenditures are anticipated to be $150 million.

Zacks Rank & Peer Releases

Currently, Cracker Barrel carries a Zacks Rank #4 (Sell).

Darden (NYSE:DRI) reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of higher revenues.

Restaurant Brands’ (NYSE:QSR) first-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, growing 86.1% from the prior-year quarter.

Chipotle’s (NYSE:CMG) first-quarter 2018 earnings surpassed expectations while revenues were in line with the same. Adjusted earnings of $2.13 grew 33.1% from the year-ago quarter, driven by higher revenues and lower food costs.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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