Bob Evans raises earnings outlook after profit beats estimates

Shares of Bob Evans (BOBE) rose in morning trading after the company reported better-than-expected earnings, despite a decline in sales. The company also raised its earnings per share outlook for the fiscal year. EARNINGS AND GUIDANCE: Bob Evans reported first quarter earnings per share excluding costs tied to restaurant closing and other items of 48c, beating analysts' estimates of 44c. Net sales for the quarter were $306.32M, below the year-ago net sales number of $321.71M and missing analysts' estimate of $310.92M. Comparable sales at the company's restaurant unit fell 4.3%, the fifth consecutive decline and below guidance for a low single digit decline. Bob Evans commented that while Bob Evans Restaurant sales were "challenged" in Q1, the company saw a moderating sales trend beginning in July that has continued into the second quarter. Quarter-to-date same-store sales were down 2% through August 29, the company said. Looking ahead, Bob Evans raised its fiscal 2017 adjusted EPS view to $2.05-$2.20 from $2.00-$2.15 and backed its net sales view to $1.28B-$1.33B. Analysts currently expect the company to report FY EPS of $2.06 on revenue of $1.3B. Chief Financial Officer Mark Hood noted that guidance has been adjusted to reflect "underlying changes in certain of our assumptions." The company expects FY17 negative low-single digit to flat SSS at Bob Evans Restaurants along with a "slightly positive" commodity cost environment. Bob Evans sees FY17 BEF Foods net sales of $400M-$420M. COMMENTARY ON POTENTIAL SPLIT: On its earnings conference call, Bob Evans' management said that all options for the company are "under consideration." The company said it was "never said" that a separation of BEF Foods and Bob Evans Restaurants "does not make sense," but noted that a separation would be a "complex transaction." Management said the board of directors is considering "all options" and that it will make a decision that is in the best interests of shareholders. SANDELL BATTLE: Activist Investor Sandell Asset Management, which owns about 7% of Bob Evans, is pushing for the company to spin off BEF Foods, as it believes that the value of the unit may approach $1.2B, exceeding the current enterprise value of the entire company. Sandell has suggested a spinoff or split-off of BEF Foods, a "sponsored" spinoff of BEF Foods, a "Reverse Morris Trust" and a spinoff of Bob Evans Restaurants. Since December, the activist investor has sent board members several letters pressuring them to mull a separation of the packaged foods unit and has pushed the idea of a spin-off or split during 30 meetings with Bob Evans management since the proxy fight, The Wall Street Journal reported earlier this year. PRICE ACTION: Bob Evans shares are up 4.4% to $40.40 in morning trading.