Restaurant Stock #1: Cracker Barrel Old Country Store (CBRL)

For investors who like consistency, but can also appreciate the occasional positive surprise, Cracker Barrel (CBRL) offers a nice mix of the two.

Cracker Barrel owns over 600 “southern country” themed restaurants, mostly located near highway exits. Each restaurant features a porch with rocking chairs and a gift shop.

The company has consistently grown revenues by low single-digits every year since 2009, while EPS have risen by double-digits in each of the last five years. Analysts expect the chain to deliver 1% sales growth and 6% EPS growth this year, followed by 4% and 7% growth next year. Eight analysts have increased their earnings estimates over the past month.

The surprises come from special dividends, which CBRL has paid in the third quarter of each of the last three years. This year’s special dividend of $3.50 per share will be paid to investors who own the stock by July 12—so you still have a few weeks to get in on it!

As for the stock, it’s been quiet for the past few years, and currently trades at a P/E of 20 and a forward P/E of 18. The regular dividend is $1.15 per quarter, for an annual yield of 2.9%. The company’s dividend payout ratio has held steady between 55% and 61% for several years.

Read More

A Restaurant Stock With Momentum

By Paul Goodwin, Chief Analyst of Cabot China & Emerging Markets Report

Originally from Cabot Wealth Advisory, 3/10/15

My recommendation of Cracker Barrel Old Country Store is motivated by a news story I found online recently that snapped my head back a bit.

Since 1992, the U.S. Census Bureau has been keeping track of how Americans spend their money. And there have been some big changes.

In 1992, people in the U.S. spent $162 in grocery stores for every $100 they dropped in restaurants.

That ratio seems about right to me, since preparing dinner and eating at home has always been the default setting in my home.

But data for January 2015 shows that-for the first time ever-Americans actually spent more money eating in restaurants than they did in grocery stores. It was close; restaurants and bars took in $50.475 billion in January, compared to revenue of $50.466 billion in grocery stores.

There are lots of reasons for this trend, many of them quite fascinating, but I went looking for a stock to recommend to honor this momentous occasion.

Cracker Barrel (CBRL) is a mid-market restaurant chain that earned its way into Cabot Top Ten Trader this week. Here’s what Mike Cintolo had to say about it:

Why the Strength
With gas prices and unemployment both at six-year lows, Americans have more discretionary income to spend than at any time since the Great Recession. And in true American fashion, many of them are spending it on food. That was certainly the case at Cracker Barrel last quarter, as traffic increased 4.7% and same-store sales jumped 7.9% at the Tennessee-based restaurant chain with a country flair. Seasonal promotions such as the restaurant’s apple cider barbecue chicken and triple berry French toast contributed to Cracker Barrel’s strong fiscal second-quarter performance, which ended January 30. Earnings per share continue to improve too as the company cuts $20 million in costs this year. The combination of cost-cutting and increased customer traffic has prompted Cracker Barrel executives to raise their full-year financial outlook. The company now expects EPS of $6.40 to $6.50 in its current fiscal year, a marked improvement over the $5.64 per share it earned in 2014. As long as gas prices remain low and the U. S. economy doesn’t implode, Cracker Barrel should continue to benefit along with the rest of the retail sector.

Technical Analysis
CBRL has been a long-term winner, but, like all stocks, it goes through corrections. CBRL pulled out of a long swoon in October 2014 and the stock ran to 140 at the end of 2014. After a seven-week consolidation, the stock popped higher on that good earnings report, nipping above 153 a couple of weeks ago. A little time for digestion has CBRL trading at 149, and you should be able to get in at least a point lower is you’re patient. I’d recommend using a stop at 138 for protection.

Read More

Stock Chart