As summer driving season dawns upon us, it’s time to pay tribute to what’s become one of the great fixtures of the American highway. On annual trips to the beach or mountains, hungry families stumble across these signs dominating the interstates we travel.
I’m talking about that roadside restaurant with the rocking chairs for sale on its front porch, Cracker Barrel (CBRL). As I write this, CBRL shares are rallying 8% following its excellent third-quarter earnings report. So let’s take a quick look at some of the fundamentals CBRL delivered last quarter. Then, we can decide for ourselves what kind of investment this monument to Southern hospitality might actually be for us right now.
First things first, though, in the interest of full disclosure, I don’t hold Cracker Barrel in any of my premium newsletters yet. However, Cracker Barrel has many of the same properties that I look for in potential new buys, including robust sales and earnings growth.
CBRL’s adjusted earnings per share jumped 22.1% year-on-year to $1.82. This beat the $1.80 consensus EPS estimate by 1.1%, which isn’t too shabby at all. Plus, total revenue rose 2.4% year-on-year to $700.1 million. Now, this might have missed the $705.7 million consensus estimate by a hair, but the average Cracker Barrel customer still spent 2.9% more per table than a year ago. That’s a significant increase.
Moreover, Cracker Barrel raised its FY 2016 sales and earnings guidance. It now expects revenue between $2.90 billion and $2.95 billion and adjusted EPS between $7.45 and $7.55. This is in line with the Street view of $2.92 billion in sales and $7.51 EPS. That’s good news for any would-be investor.
Not to mention, CBRL increased its quarterly dividend by 4.5% to $1.15 per share. Shareholders of record on July 15 will be paid this dividend on August 5. So right now could be the perfect buying opportunity. What’s more, Cracker Barrel declared a special dividend of $3.25 per share, which shareholders of record on July 15 will be paid on July 29. And to make things even more intriguing, Cracker Barrel now has a 2.8% annualdividend yield to boot.
Add this all up, and while Cracker Barrel currently has a C-rated Fundamental Grade in my Portfolio Grader tool, this will likely firm up once these latest results have been plugged into the equation. And with an A-rated Portfolio Grader Quantitative Grade, CBRL has tremendous upside potential. This already makes it an overall B-rated Buy in Portfolio Grader.
But to make the case for CBRL even more attractive, simply take a look at its Dividend Grader grade as well. CBRL earns high marks for Dividend Trend, Dividend Reliability and Forward Dividend Growth, making it an A-rated Strong Buy in Dividend Grader.
Overall, even though CBRL is not yet in any of my premium newsletters’ portfolios, it appears to be a solid buy as we head into summer.