Estimates have been rising for
Bob Evans Farms, Inc.
) after the company delivered better-than-expected results for the
third quarter of its fiscal 2012 on February 14.
It is a Zacks #2 Rank (Buy) stock.
Based on consensus estimates, analysts expect 16% EPS growth this
year, 8% growth next year, and 9% growth over the long-run. On top
of this, the company pays a dividend that yields a stellar 2.6%.
Bob Evans Farms, Inc. owns and operates 709 restaurants as of
January 27, 2012, including 564 Bob Evans Restaurants in 18 states
and 145 Mimi's Cafes in 24 states.
Bob Evans Restaurants are primarily located in the Midwest,
mid-Atlantic and Southeastern United States, while Mimi's are
mostly in California and other western states.
The company was founded in 1953 and is headquartered in Columbus,
Ohio. It has a market cap of $1.1 billion.
Third Quarter Results
Bob Evans reported better-than-expected results for the third
quarter of its fiscal 2012 on February 14. Earnings per share came
in at 69 cents, beating the Zacks Consensus Estimate by 9 cents. It
was a 35% increase over the same quarter last year.
Net sales were flat year-over-year at $428.3 million. Negative
same-store sales at Mimi's was offset by same-store sales growth at
Bob Evans Restaurants.
The gross margin did contract a bit due to higher commodity costs
in the foods segment. But this was more than offset by a decrease
in wages as a percentage of net sales.
The company also benefited from a lower tax rate in the quarter.
Following solid Q3 results, management raised the lower end of its
fiscal year 2012 EPS guidance from $2.36 to $2.38, and reaffirmed
the upper end of $2.44.
This prompted analysts to raise their estimates for both 2012 and
2013, sending the stock to a Zacks #2 Rank (Buy) stock.
The Zacks Consensus Estimate for 2012 is now $2.45, slightly above
guidance, and representing 16% growth over 2011 EPS. The 2013
consensus estimate is currently 8% higher at $2.64.
Over the long run, management believes it has the "resources and
programs in place" to deliver annual EPS growth in the 7-10% range.
The 5-year consensus EPS growth rate among analysts is within this
target at 9%.
In addition to solid earnings growth, the company pays a dividend
that yields a stellar 2.6%. Since 2000, the company has steadily
increased its dividend at a compound annual rate of 9%:
The valuation picture looks reasonable with shares trading at 15x
12-month forward earnings, in-line with industry median. Its price
to cash flow ratio of 8 is also in-line with its peers.
The Bottom Line
With rising estimates, solid growth projections, a 2.6% dividend
yield and reasonable valuation, Bob Evans offers investors
attractive total return potential.
Todd Bunton is the Growth & Income Stock Strategist for
and Co-Editor of the
Reitmeister Value Investor
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