Beat the Street with Sweet Tea and Biscuits?
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.
About the Author | Browse Mitchell Clark's Articles
Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »
Forecasts Aug. 28, 2015
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 28, 2015
|Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)||$1014.15|
|Trailing 12-month Price/earnings multiple (Most Recent Quarter)|
|Dow Jones Industrial Average Dividend Yield||2.71%|
|10-year U.S. Treasury Yield||2.14%|