Telsey Advisory: Time To Buy Cracker Barrel

Telsey Advisory’s Bob Derrington upgraded the rating for Cracker Barrel Old Country Store, Inc CBRL from Market Perform to Outperform, while raising the price target from $142 to $160.

Cracker Barrel’s strengths lie in its consistently better-than-most-peers SSS and operating performance, continuous cost cutting measures to support strong free cash flow and dividend payout as well as the stock’s attractive valuation.

While the company’s core business continues to perform well, it is poised for further top-line and bottom-line growth, given the expected incremental contribution from its new Fast Casual concept, analyst Bob Derrington mentioned.

The company is in advanced stages of opening its new fast casual restaurants dubbed Holler & Dash Biscuit House, or H&D.

“It is expected to open (after some minor permitting delays) deep in the heart of Dixie, in Homewood, Alabama in mid- March. Based on our sources, we believe H&D is poised to contribute very strong operating returns for CBRL,” the Telsley Advisory report noted.

The EPS estimates for FY2016 and FY2017 have been raised from $7.22 to $7.50 and from $7.92 to $8.50, respectively. The company’s robust free cash flows are expected to fuel steady growth of its dividend yield of 3.2 percent.