Please ensure Javascript is enabled for purposes of website accessibility

Why Bob Evans Farms, Inc. Stock Slipped 15% Last Month

By Jeremy Bowman - Jul 7, 2016 at 1:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The restaurant chain fell on a weak earnings report and outlook.

Image Source: Motley Fool.

What: Shares of Bob Evans Farms, Inc. (BOBE) lost 15% in June as the casual dining chain delivered an underwhelming fourth-quarter earnings report and outlook for fiscal 2017. Looking at the chart below, you can see that the stock dropped 9% on June 15, the day of the report, and continued to fall after that.

BOBE Chart

BOBE data by YCharts

So what: The company said comparable sales slipped 3% in the past quarter, the fourth consecutive quarterly decline in that key metric, and adjusted per-share profit fell from $0.56 a year ago to $0.48. That still beat expectations at $0.43, however.

Despite the sell-off and sliding comparable sales, CEO Saed Mohseni noted that the company's packaged foods division, which sells meat products like sausage and bacon, had "an excellent year," and said the restaurant business made important strides toward enhancing the guest experience, such as a new menu rollout expected in August.  

Now what: The primary reason the stock got hammered seemed to be a disappointing outlook for fiscal 2017. Management projected same-store sales from negative low-single digits to flat, and an adjusted EPS of $2.00-$2.15, below analyst expectations of $2.20 at the time.

While the restaurant side of the business continues to struggle, the packaged food division has been a much needed bright spot. Operating income from Foods nearly doubled to $71 million, contributing more than twice the operating income from Restaurants despite much lower sales. 

Investor Thomas Sandell, who owns a third of the board, has been pushing for a separation of the two segments. Though management shows no signs of entertaining such an idea, if the two segments' results continue to move in opposite directions, a spinoff is more likely to happen.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bob Evans Farms, Inc. Stock Quote
Bob Evans Farms, Inc.
BOBE

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
338%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.