Option Trade
Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) Calls 
Tuesday, 13th September, 2016

** OPTION TRADE: Buy the CBRL DEC 16 2016 155.000 call at approximately $4.20. Place a pre-determined sell at $8.40.

Note: No protective stop losses added -- but if you wish to do so make it $1.70.

by Ian Harvey

September 13, 2016

Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL), a casual dining chain, will report its fiscal fourth-quarter numbers on September 14. The company will post its quarterly numbers before the market open, with the consensus calling for earnings of $2.10 per share on revenue of $741.9 million. During the same period last year the company earned $1.97 per share on revenue of $719.2 million.

Cracker Barrel has a solid history of posting better than expected quarterly reports, and Wall Street expects another beat this quarter. The street has a whisper number of $2.12 for the quarter. The stock has been trending lower over the last two months, but a decent quarterly report should help bring strength back into the stock. With the street calling for a beat of two pennies, there is an increased chance of another earnings beat and shares moving higher on the news.

The stock has a P/E of 19.3, and with earnings forecast to rise by 10.7% this year, and 10.2% next year, the stock appears to be very reasonably priced. If the company is able to hit the $2.12 whisper number, it would translate to year over year earnings growth of 7.6%.

Cracker Barrel shares are riding high heading into the restaurant chain's earnings report on Wednesday. The stock has significantly outperformed industry peers, and surged 20% higher so far in 2016.

There are good reasons for that bullishness on the part of investors. Operating income jumped by 21% last quarter thanks to cost cuts and steadily rising demand on both the retailing and food service sides of the business. Cracker Barrel's bottom-line margin is 6.4% of sales over the last nine months, marking a major improvement over the prior year period's 5.5%.

The company last posted 2.2% higher retail comps and 2.3% higher restaurant comps, which is roughly what management has projected for the current quarter.

Cracker Barrel Old Country Store Inc. has a market cap of $3.52 billion, a PE ratio of 19.3 and a beta of 0.38. Cracker Barrel Old Country Store Inc. has a 52 week low of $118.01 and a 52 week high of $172.89. The firm’s 50-day moving average price is $156.81 and its 200 day moving average price is $155.58.

Why Cracker Barrel?

Cracker Barrel's distinctiveness in the retail-restaurant sector lies in the fact that apart from serving food, its restaurant establishments have old-country feel along with unique gift shops that offer rocking chairs to seasonal gifts. Again, the outlets offer home-style country food without alcoholic beverages -- a contrast to typical casual dining restaurants.

Notably, even without offering any alcoholic beverage, the company had positive comparable store restaurant and retail sales growth and continued to outperform the casual dining industry during the fiscal third quarter. Its operating income has increased by nearly 20%. During the third-quarter earnings call, the company raised its full-year EPS forecast based on its year-to-date results.

Even in the preceding quarter, Cracker Barrel hiked its quarterly dividend by 4.5% to $1.15 per share from $1.10.

For the fiscal fourth quarter, the Consensus Estimate for earnings stands at $2.10 a share, an increase of 6.8% year over year, while the consensus mark for revenues is pegged at $742 million, implying 3.2% year-over-year growth.

Analyst Input

Cracker Barrel Old Country Store Inc. was upgraded by Zacks Investment Research from a “sell” rating to a “hold” rating in a research report issued last Tuesday.

According to Zacks, “Cracker Barrel Old Country Store, Inc., formerly CBRL Group, Inc., is principally engaged in the operation and development of the Cracker Barrel Old Country Store restaurant and retail concept. The format of Cracker Barrel stores consists of a rustic, old country-store design with a separate retail area offering a variety of decorative and functional items featuring rocking chairs, holiday and seasonal gifts and toys, apparel, cookware and foods, including various old fashioned candies and jellies.“

Also, several other equities research analysts have recently commented on the company.

• Bank of America Corp. downgraded shares of Cracker Barrel Old Country Store from a “neutral” rating to an “underperform” rating and set a $140.00 price target on the stock in a research note on Monday, July 11th. They noted that the move was a valuation call.

• SunTrust Banks Inc. upped their price target on shares of Cracker Barrel Old Country Store from $151.00 to $152.00 and gave the stock a “neutral” rating in a research note on Thursday, June 2nd.

• Telsey Advisory Group downgraded shares of Cracker Barrel Old Country Store from an “outperform” rating to a “market perform” rating and upped their price target for the stock from $160.00 to $172.00 in a research note on Thursday, June 2nd.

• Finally, Maxim Group dropped their price target on shares of Cracker Barrel Old Country Store from $178.00 to $170.00 and set a “buy” rating on the stock in a research note on Monday, August 8th.

One research analyst has rated the stock with a sell rating, four have given a hold rating and three have issued a buy rating to the company. The company presently has a consensus rating of “Hold” and an average target price of $165.83.

Harvey’s Options Volatility Indicator

Conclusion

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the CBRL DEC 16 2016 155.000 call at approximately $4.20. Place a pre-determined sell at $8.40.

Note: No protective stop losses added -- but if you wish to do so make it $1.70.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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