Argus analyst John Staszak upgraded Cracker Barrel (CBRL) to Buy this morning following first quarter results he called, “strong,” as he believes the company is on track for continued growth in comparable sales and margins in fiscal year 2019. This comes a day after his peer at Gordon Haskett downgraded the stock to a sell-equivalent rating, saying the share price run-up of 22% over the last eight weeks is outpacing the company’s fundamental prospects.
ARGUS SAYS BUY CRACKER BARREL: In a research note to investors, Argus’ Staszak upgraded Cracker Barrel to Buy from Hold, with a price target of $210. The analyst highlighted that the company posted better than expected fiscal first quarter comparable sales, driven by “value pricing,” enhanced marketing efforts, and new menu items, such as premium coffee. Operating margins also rose despite higher labor costs, he added. Staszak also told investors that he expects continued growth in both comparable sales and margins in the coming quarters. Cracker Barrel, with its many locations near interstate highways, should benefit from the recent decline in gas prices and continue to add new locations at a steady clip, he contended. The analyst also raised his FY19 earnings per share view to $9.35 from $9.30 and added he believes the stock can grow its multiple from the current 19.4-times forward earnings valuation.
GORDON SAYS SELL CRACKER BARREL: Bearish on the stock, Gordon Haskett analyst Jeff Farmer downgraded Cracker Barrel to Underperform from Hold yesterday, stating that the share price run-up of 22% over the last eight weeks is outpacing the company's fundamental prospects across same-store sales, operating income margin and earnings per share growth. The analyst argued that the valuation premium relative to the casual dining peer group is “overdone” given that the company’s FY19 fundamentals across several metrics are lagging or are in line with that of its peers, and expects moderating fundamental momentum to lead to a narrowing of Cracker Barrel’s valuation premium to both the peer group and the stock’s historical valuation levels. The perceived strength of the relationship between falling gas prices and Cracker Barrel’s traffic is “exaggerated,” he contended, adding that while the correlation is solid, it is not exceptionally strong and has “weakened meaningfully” over the last 24 months. Overall, Farmer believes that back-to-back quarters of market share losses suggest that the return of market share gains is not imminent. The analyst also lowered his price target on the stock to $160 from $170.
PRICE ACTION: In morning trading, shares of Cracker Barrel have gained about 1% to $182.76.
Cracker Barrel
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