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Truist cuts Cracker Barrel shares target on lowered FY24 guidance

EditorEmilio Ghigini
Published 05/31/2024, 07:46 AM

On Friday, Truist Securities adjusted its outlook on Cracker Barrel (NASDAQ:CBRL) Old Country Store, Inc. (NASDAQ:CBRL) shares, reducing the price target to $46 from the previous $51 while maintaining a Hold rating on the stock.

The revision follows the company's fiscal third-quarter 2024 results, which showed a miss on same-store sales but an adjusted earnings per share (EPS) beat, primarily due to tax benefits.

The restaurant and gift store chain reported its quarterly performance earlier in the week, leading to a reassessment of the company's financial projections for the full fiscal year. In light of the updated company guidance and new adjustments to EPS, the firm has decided to revise its estimates downward.

Truist's analysis suggests that, although there has been a slight improvement in customer traffic since the third fiscal quarter, the overall results are expected to continue facing challenges.

The firm anticipates persistent pressure on Cracker Barrel's financial outcomes until there is an uptick in spending by lower-income consumers and a reduction in competitive discounting.

The report indicates that the prospects for a sales and margin recovery at Cracker Barrel are still uncertain. Truist refers to the situation as a 'show me' story, indicating that investors may need to see tangible progress before gaining confidence in the company's turnaround efforts.

Additionally, the analyst predicts that the company is likely to experience margin compression in fiscal year 2025 due to a resurgence of food cost inflation, which is expected to precede any significant cost savings initiatives by the company.

InvestingPro Insights

With Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) navigating through a challenging period, real-time data and insights from InvestingPro could provide investors with additional context. The company's market capitalization stands at $1.07 billion, and it shows a price-to-earnings (P/E) ratio of 12.7. This valuation metric suggests a reasonably priced stock relative to earnings, especially when considering the adjusted P/E ratio for the last twelve months as of Q2 2024, which is 11.27. Despite a slight revenue growth of 1.02% in the same period, the short-term performance paints a different picture, with the stock experiencing a 17.31% decline in the past month.

An InvestingPro Tip highlights that Cracker Barrel has maintained dividend payments for 43 consecutive years, signaling a potential draw for income-focused investors. However, it's important to note that eight analysts have revised their earnings downwards for the upcoming period, indicating potential headwinds. Moreover, the company's short-term obligations exceed its liquid assets, which could be a point of concern for financial stability.

For those considering an investment in Cracker Barrel, it may be beneficial to explore the additional 8 InvestingPro Tips available at https://www.investing.com/pro/CBRL. And remember, you can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering a deeper dive into the company's financial health and future prospects.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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