Friday, March 1st, 2013
By Mitchell Clark, B.Comm. for Profit Confidential
Years ago, I used to spend a lot of money in restaurants. That was before I learned how to cook. Now, I particularly dislike going to fancy restaurants. The food is always way overpriced, and I don’t like playing the game. When I go out to eat, I feel much more at home in casual restaurants, and while I know it might not be appropriate, I love the food at chain restaurants.
One chain that is doing great, both operationally and on the stock market, is Cracker Barrel Old Country Store, Inc. (NASDAQ/CBRL). Cracker Barrel isn’t a franchise operation; it owns all of its 621 stores, which means that management can keep tight control over operations. Typically, the most profitable product that a restaurant sells is soda. For Cracker Barrel, its most recent quarter produced growth in comparable store sales of 3.3%, and its average check grew 3.1%.
Cracker Barrel is a dividend paying stock with a three percent yield. Recently, on the stock market, the shares soared 10% the day the company reported its latest earnings. According to the company, its revenues grew 4.4% to $702.7 million and Generally Accepted Accounting Principles (GAAP) diluted earnings per share grew to $1.47, way up from $1.10. The company beat the Street on revenues and earnings, and it raised its full-year outlook. Cracker Barrel’s stock market chart is below:
Chart courtesy of www.StockCharts.com
You know, there is a lot of doom and gloom out there, and investment risk is high. Times certainly aren’t as good as they used to be for a lot of people. But doom and gloom sells; it always has, and it always will. This is particularly the case in media. While there have been some spectacular shocks to the U.S. economy in recent years, and while so many things are out of touch with reality, corporate earnings are still growing and balance sheets are top notch.
In its first fiscal quarter of 2013, Cracker Barrel also reported strength in its sales and earnings. The company’s CEO, Sandra B. Cochran, noted that the business just experienced its fifth consecutive quarter of comparable store traffic and sales growth. (See “Fast Food Offers More Value Menus—and More Cash, Too.”) The U.S. consumer is stepping up to the plate, as it were, and Cracker Barrel is a standout business.
The stock market is still going to benefit greatly from the Federal Reserve’s easy money. As a stock market investor, there’s plenty of noise out there to distract you, but the most important news is what corporations say about their businesses. There’s no practical reason yet to jump ship, especially with dividend paying stocks.
Corporate earnings held solid during the fourth quarter of 2012, and the stock market is in a consolidation, because of its amazing start to the year. I figure the stock market will bounce around its current level until first-quarter earnings season begins. Like corporations said in their outlooks, it’s fair to assume we’ll get another modest, but solid earnings season. The S&P 500’s long-term chart is still very ominous, but the stock market isn’t done yet.
|Total 2012 per share earnings for 30 stocks in the Dow Jones Industrial Average:||$900|
|Dow Jones Industrial Average Price/earnings multiple:|
|Dow Jones Industrial Average Dividend Yield:||2.4%|
|10-year U.S. Treasury Yield:||2.17%|
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