Truist Securities has adjusted its outlook on Cracker Barrel shares (NASDAQ: NASDAQ:CBRL), reducing the price target to $42.00 from the previous $46.00.
The firm retained a Hold rating on the stock. The revision comes as the analyst anticipates potential near-term risks ahead of the company's fiscal fourth quarter 2024 results, expected to be released on September 17, 2024. The concerns are primarily centered around the possibility of weaker-than-expected fiscal year 2025 guidance.
The analyst noted that Truist Card Data suggests that Cracker Barrel's same-store sales (SSS) for the fourth fiscal quarter of 2024 are projected to be roughly in line with estimates, which predict flat growth.
Additionally, there was a modest increase in sales during August, mirroring industry trends. Despite this, the firm foresees potential challenges for the fiscal year 2025, including a persistently weak demand environment, approximately 30 basis points of atypical benefits in fiscal year 2024 that are unlikely to recur, and rising egg prices. These factors contribute to the firm's projection of adjusted EBITDA for fiscal year 2025 to be around 4% below the consensus.
In light of these macroeconomic risks, Truist Securities has slightly raised its sales estimates, but the price target has been lowered to reflect the anticipated challenges. The new target is based on a 12 times target price-to-earnings (P/E) ratio.
In other recent news, Cracker Barrel finds itself in another proxy contest with Biglari Holdings Inc. Biglari is nominating five candidates, including himself, for election to Cracker Barrel's Board of Directors at the upcoming 2024 Annual Meeting of Shareholders, marking the seventh such contest in 13 years. Despite this, the current Board, which includes nine independent directors, plans to review the nominations as part of its commitment to good governance.
The company also announced third-quarter fiscal results, reporting a revenue of $817.1 million and an adjusted EBITDA of $47.9 million. Although same-store sales expectations were not met, an adjusted earnings per share beat was reported, primarily due to tax benefits. In response, Truist Securities revised its outlook on Cracker Barrel, reducing the price target but maintaining a Hold rating.
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