Cracker Barrel's 10 Straight Quarters Of Higher Comps Led Argus To Upgrade

Cracker Barrel Old Country Store, Inc. CBRL has reported higher comp sales for the past 10 successive quarters.

Argus’ John Staszak upgraded the rating on the company from Hold to Buy, with a price target of $190.

Improvements Expected

Staszak believes the company’s “barbell strategy” that entails “a dual focus on more expensive menu items and value meals” to lead to low-single-digit comp growth in FY 2017.

“We also expect further cost savings from restaurant-level operating efficiencies, which should offset higher labor expense,” the analyst mentioned.

In addition, Staszak expects a 4 percent decline in Cracker Barrel’s commodity costs in 2017, driven by a decrease in beef and egg prices.

“Over the long term, we believe that management can improve sales at Cracker Barrel restaurants through more efficient labor scheduling, faster service, radio and television ads, and roadside billboards,” the analyst stated.

Staszak also expects management to utilize the proceeds from sale-leaseback transaction to repay debt, while boosting the dividend and buying back shares.

Q1:17 Results

Cracker Barrel reported its fiscal Q1:17 revenue at $710 million, missing the consensus expectations.

The adjusted EPS, however, came in at $2.01, well ahead of the consensus forecast.

The FY 2017 and FY 2018 EPS estimates have been raised from $8.12 to $8.30 and from $8.70 to $8.88, respectively.

At last check, Cracker Barrel shares were up 1.82 percent at $165.71.