Bojangles Is Doing Well Despite Heavy Competition; Stephens Analyst Retains Overweight

Stephens boosted the price target of Bojangles Inc BOJA to $22 from $20 after the company reported another earnings beat despite the competitive environment. The company reported strong results for the first quarter, including a company-owned SSS growth of +2.7 percent and adj. EPS of $0.21 compared to the consensus of +2.1 percent and $0.18, respectively. The brokerage also reiterated its Overweight rating on the company's shares.

Analyst Will Slabaugh said, "We remain encouraged by the resiliency of this regional brand, which has shown the ability to tactically navigate an increasingly competitive quick-service environment, whose headlines have been dominated by the more aggressive promotional budgets of the larger, national brands. We believe this performance should provide support for the stock in the near-term, despite a flat QTD comp, as we begin to lap easier comparisons throughout FY16."

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Slabaugh elaborated, "With respect to the Company's competitive strategy for navigating the current environment, it will continue to avoid participating in the discounted meal pricing wars to prevent diluting the brand's equity." The brokerage said, "Instead, BOJA looks to become more tactical and regionally aggressive in its marketing message that stresses everyday value and targeted regional promotions. As the Company noted on the call, it has various new LTOs and calendar-event driven occasions in the pipeline for the balance of the year, while it also looks to actively leverage sponsorship as a way of growing brand awareness in newer, non-core markets."

Slabaugh added, "Although we expect the entire quick-service industry to remain competitively choppy (referenced by QSR last week), we are confident in the Company's ability to remain responsive to the current operating environment and have little concern in its ability to meet or potentially exceed the low-single-digit comp guidance."

Furthermore, the FY16 company-owned SSS growth estimate was marginally decreased to +1.7 percent from the previous +2.9 percent, "given commentary on the call regarding a flat April trend."

" However, we are raising our adj. EPS estimates to $0.86 from $0.83," Slabaugh explained. "Our FY17 Company-owned SSS growth and adj. EPS estimates are +2.8 percent and $0.98. GAAP and other estimates can be seen in the table to the left and in the attached model."

At time of writing, Bojangles was trading lower by 0.5 percent at $18.00.