Can Cracker Barrel Keep Setting Record Highs?

On Monday, Cracker Barrel Old Country Store (NASDAQ: CBRL  ) will release its latest quarterly results. But with the stock having recently hit all-time record highs, can the restaurant chain's earnings deliver enough to justify its stock's performance?

If you've ever taken a road trip, you've probably seen plenty of Cracker Barrel locations along the way, as the company has more than 600 locations across the nation. What sets Cracker Barrel apart from most chains is the fact that it has gift shops connected to its restaurants, combining a retail business with its primary food exposure. Let's take an early look at what's been happening with Cracker Barrel over the past quarter, and what we're likely to see in its quarterly report.

Stats on Cracker Barrel

Analyst EPS Estimate

$0.94

Change From Year-Ago EPS

9.3%

Revenue Estimate

$630.56 million

Change From Year-Ago Revenue

3.6%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

How will Cracker Barrel's earnings fare this quarter?
Wall Street has gotten more optimistic about Cracker Barrel's earnings in recent months, boosting their estimates for the April quarter by $0.02 per share, and raising full-year fiscal 2013 calls by more than $0.10 per share. The stock has reflected that optimism, soaring 23% since late February.

As in past years, most of the attention around Cracker Barrel's stock lately has come from the ongoing battle between the company and Biglari Holdings (NYSE: BH  ) , which owns roughly 20% of Cracker Barrel's shares. Back in February, the company offered to buy back Biglari's stock in hopes that it could avoid a third consecutive proxy fight to try to get Biglari CEO Sardar Biglari onto the board of directors. But Biglari rejected Cracker Barrel's offer.

Meanwhile, investors seem untroubled by Biglari's accusations that Cracker Barrel isn't properly accounting for the retail side of its business. Biglari has come up with estimates of return-on-investment for the company that are more than 10 percentage points lower than Cracker Barrel's own figures, claiming that the company has improperly excluded important expenses in its ROI calculations.

Lost in the debate over Biglari has been the tepid growth in Cracker Barrel's business. Same-store sales rose 3.3% during the most recent quarter, with overall sales rising at a slightly faster 4.5% pace. But the range of earnings guidance that Cracker Barrel provided implied maximum growth for full-year 2013 of just 4%.

Still, the stock's performance reflects overall enthusiasm about restaurant chains generally. Red Robin Gourmet Burgers (NASDAQ: RRGB  ) struggled mightily during the recession, but its stock has bounced back convincingly, with gains sending shares to levels not seen since 2005. Even Brinker International (NYSE: EAT  ) , which cut its estimates on same-store sales growth to just 1%, and guided earnings to the lower end of its previous range, has seen its stock soar in anticipation of better times ahead.

In Cracker Barrel's report, look closely for further signs of Biglari's influence. Unless the company's growth initiatives bear more fruit, the stock's recent run has left it looking unappetizing at current levels.

Combining retail and restaurants in one location has proven to be an innovative move for Cracker Barrel. But the retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

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