Restaurant chain Cracker Barrel Old Country Store, Inc.CBRL is set to release fourth-quarter fiscal 2016 results before the opening bell on Sep 14. In the preceding quarter, the company posted a positive earnings surprise of 1.11%. Let's see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Cracker Barrel is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Cracker Barrel has an Earnings ESP of +1.91%. That is because the Most Accurate estimate is $2.14 while the Zacks Consensus Estimate is pegged lower at $2.10. This is a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Cracker Barrel has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of Cracker Barrel's Zacks Rank #3 and +1.91% ESP makes us reasonably confident of an earnings beat.
Price, Consensus and EPS Surprise
What's Driving the Better-Than-Expected Earnings?
Cracker Barrel's distinctiveness in the retail-restaurant sector lies in the fact that apart from serving food, its restaurant establishments have old-country feel along with unique gift shops that offer rocking chairs to seasonal gifts. Again, the outlets offer home-style country food without alcoholic beverages -- a contrast to typical casual dining restaurants.
Notably, even without offering any alcoholic beverage, the company had positive comparable store restaurant and retail sales growth and continued to outperform the casual dining industry during the fiscal third quarter. Its operating income has increased by nearly 20%. During the third-quarter earnings call, the company raised its full-year EPS forecast based on its year-to-date results.
Even in the preceding quarter, Cracker Barrel hiked its quarterly dividend by 4.5% to $1.15 per share from $1.10.
Although the U.S. economy is improving with lower energy costs driving consumer spending, soft comps and traffic trends raise concern for the overall industry. Again, as per the Zacks Industry Rank, the retail-restaurants industry is currently ranked in the bottom 26%.
For the fiscal fourth quarter, the Zacks Consensus Estimate for earnings stands at $2.10 a share, an increase of 6.8% year over year, while the consensus mark for revenues is pegged at $742 million, implying 3.2% year-over-year growth.
Other Stocks that Warrant a Look
Like Cracker Barrel, we see likely earnings beats coming from these industry peers.
Jamba, Inc. JMBA has an earnings ESP of +20.00% and a Zacks Rank #3. The company is expected to report third-quarter 2016 results on Nov 14.
The Wendy's Company WEN has an earnings ESP of +10.00% and a Zacks Rank #3. The company is expected to report third-quarter 2016 results on Nov 9.
Wingstop Inc. WING has an earnings ESP of +9.09% and a Zacks Rank #2. The company is expected to report third-quarter 2016 results on Nov 3. You can see the complete list of today's Zacks #1 Rank stocks here .
See our video article on Cracker Barrel's expected earnings here .
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