Cracker Barrel Old Country Store, Inc. (CBRL) recently delivered a 10% earnings beat as a modest increase in same-store sales led to a significant increase in income thanks to relatively high operating leverage. It was the company’s 9th consecutive positive earnings surprise.
Higher commodity costs are expected to persist and will put pressure on Cracker Barrel’s margins. Despite this, management reiterated its EPS guidance for 2011. Meanwhile, analysts continue to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).
EPS Up 30%
Cracker Barrel reported its results for the first quarter of 2011 on November 23. Earnings per share came in at $1.01, beating the Zacks Consensus Estimate by 9 cents. It was a 29.5% increase over the same quarter in 2010.
Total revenue increased a modest 3.0% year-over-year as same-store restaurant sales were up 2.4%. The average check increased 1.9% as the average menu price increase was 2.0%.
The retail side of the business (which accounts for nearly 20% of total revenue) saw a 1.5% increase in same-store sales.
Meanwhile the gross margin increased from 69.5% of sales to 70.0%, while labor and other related expenses fell from 38.7% of sales to 37.6%. These factors led to a 20% increase in operating income year-over-year.
Reaffirms Guidance
Management expects total revenue to grow 3.0% to 4.5% over 2010. The company also expects commodity costs to be higher for the rest of its fiscal year. Despite this, the company reaffirmed its 2011 EPS guidance of $3.95 to $4.10.
Estimates for 2011 have been trending significantly higher as the company continues to beat on earnings.
The Zacks Consensus Estimate for 2011 is currently above guidance at $4.12, representing an 11% increase in EPS over 2010. The 2012 estimate stands at $4.61, equating to 12% EPS growth.
Dividend Hike
The company recently raised its dividend by 10% after holding it steady in 2009. Excluding 2009, Cracker Barrel has hiked its dividend every year since 2003. The company has raised it at a compound annual growth rate of 10.8% since 2005.
The stock carries a dividend yield of 1.6%.
Valuation looks quite reasonable for this restaurant chain. Shares trade at just 12.8x forward earnings and have a PEG ratio of 1.2.
This is roughly in-line with other restaurant chains. Darden Restaurants (DRI), which operates Olive Garden and Red Lobster, also carries a PEG ratio of 1.2. Ruby Tuesday (RT) is a bit higher at 1.4 but Texas Roadhouse (TXRH) is a bit lower at 1.1.
Cracker Barrel Old Country Store, Inc. was founded in 1969 and is headquartered in Lebanon, Tennessee. The company operates 597 stores in 42 states. It has a market cap of $1.2 billion.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
CRACKER BARREL (CBRL): Free Stock Analysis Report
Zacks Investment Research
