Earnings Analysis For Cracker Barrel Old Country Store Inc.

| About: Cracker Barrel (CBRL)

Cracker Barrel Old Country Store Inc. (NASDAQ:CBRL) reported preliminary financial results for the year ended 2012-07-31.

Cracker Barrel Old Country Store Inc. reported on Wednesday its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company's performance over the last twelve months (unless stated otherwise).

Cracker Barrel Old Country Store Inc.'s analysis versus peers uses the following peer-set: Arcos Dorados Holdings Inc. Cl A (NYSE:ARCO), Brinker International Inc. (NYSE:EAT), Cheesecake Factory Inc. (NASDAQ:CAKE), Zensho Holdings Co. Ltd. (7550-), Buffalo Wild Wings Inc. (NASDAQ:BWLD), Domino's Pizza Group PLC (NYSE:DOM), Bob Evans Farms Inc. (NASDAQ:BOBE), DineEquity Inc. (NYSE:DIN), Biglari Holdings Inc. (NYSE:BH) and Denny's Corp. (NASDAQ:DENN). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Annual (USD million) 2012-07-31 2011-07-31 2010-07-31 2009-07-31 2008-07-31
Revenues 2,580.2 2,434.4 2,404.5 2,367.3 2,384.5
Revenue Growth % 6.0 1.2 1.6 (0.7) 1.4
Net Income 103.1 85.2 85.3 66.0 65.3
Net Income Growth % 21.0 (0.1) 29.3 1.0 (14.1)
Net Margin % 4.0 3.5 3.5 2.8 2.7
ROE % 31.7 37.1 52.1 57.8 66.3
ROA % 7.4 6.3 6.5 5.0 4.9
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Valuation Drivers

Cracker Barrel Old Country Store Inc.'s current Price/Book of 3.9 is about median in its peer group. We classify Cracker Barrel Old Country Store Inc. as Harvesting because of the market's low expectations of growth (P/E of 14.6 compared to peer median of 18.9) despite its relatively high returns (ROE of 31.7% compared to the peer median ROE of 17.5%).

The company's profit margins are below peer median (currently 4.0% vs. peer median of 5.4%) while its asset efficiency is about median (asset turns of 1.9x compared to peer median of 1.7x). Cracker Barrel Old Country Store Inc.'s net margin is its highest relative to the last five years and compares to a low of 2.7% in 2008.

Economic Moat

Growth in Cracker Barrel Old Country Store Inc.'s revenues and earnings have been in-line with its chosen peers (annual revenue growth of 6.0% and earnings growth of 21.0% respectively). Its top-line performance seems to imply 'more of the same' for earnings. Cracker Barrel Old Country Store Inc. is currently converting every 1% of change in revenue into 3.5% change in annual reported earnings.

Cracker Barrel Old Country Store Inc.'s return on assets currently is around peer median (7.4% vs. peer median 7.4%) -- similar to its returns over the past five years (6.0% vs. peer median 6.0%). This performance suggests that the company has no specific competitive advantages relative to its peers.

The company's gross margin of 33.6% is around peer median suggesting that Cracker Barrel Old Country Store Inc. 's operations do not benefit from any differentiating pricing advantage. In addition, Cracker Barrel Old Country Store Inc. 's pre-tax margin of 5.7% is also around the peer median suggesting no operating cost advantage relative to peers.

Growth & Investment Strategy

While Cracker Barrel Old Country Store Inc.'s revenues growth has been around the peer median (2.9% vs. 3.0% respectively for the past three years), the stock's below peer median P/E ratio of 14.6 implies below median long-term growth as well. The market likely sees the company's long-term growth prospects to be fading.

Cracker Barrel Old Country Store Inc. 's annualized rate of change in capital of 5.1% over the past three years is around its peer median of 5.1%. This median investment has likewise generated a peer median return on capital of 11.2% averaged over the same three years. This median return on investment implies that the company is investing appropriately.

Earnings Quality

Cracker Barrel Old Country Store Inc. reported relatively weak net income margins for the last twelve months (4.0% vs. peer median of 5.4%). This weak margin performance and relatively conservative accrual policy (4.5% vs. peer median of 3.7%) suggest the company might likely be understating its net income, possibly to the extent that there might even be some sandbagging of the reported net income numbers.

Cracker Barrel Old Country Store Inc.'s accruals over the last twelve months are positive suggesting a buildup of reserves. In addition, the level of accrual is greater than the peer median -- which suggests a relatively strong buildup in reserves compared to its peers.

Trend Charts

Company Profile

Cracker Barrel Old Country Store, Inc. is engaged in the operation and development of restaurant and retail concepts in the United States. The company operates restaurants under the Cracker Barrel Old Country Store name. Its restaurants provide a friendly home away from home atmosphere in its old country store and restaurant. Cracker Barrel was founded by Dan W. Evins on September 19, 1969 and is headquartered in Lebanon, TN.


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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.