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These 2 Real-World Companies Prove the Economy's Bouncing Back

By Dan Caplinger - May 25, 2021 at 11:31AM

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Find out the impact Main Street is having on Wall Street.

The stock market has remained resilient throughout the COVID-19 pandemic, rebounding quickly from the initial shock of a global health crisis to post amazing returns in 2020. However, the global economy took a little more time to get back on its feet. Now, as economies reopen and vaccination efforts proceed apace, investors are hopeful that even some of the companies that got left behind will start to bounce back.

That hope led to a modest rise in the stock market on Tuesday morning. As of 10:45 a.m. EDT, the Dow Jones Industrial Average (^DJI 0.09%) was up 22 points to 34,416. The S&P 500 (^GSPC -0.12%) had picked up 3 points to 4,200, and the Nasdaq Composite (^IXIC 0.00%) had risen 43 points to 13,704.

In particular, a couple of companies that average people outside the investing community know well released their latest financial reports. For investors in AutoZone (AZO 1.07%) and Cracker Barrel Old Country Store (CBRL 3.79%), share price moves were mixed, but both companies had encouraging things to say about improving economic conditions in the U.S. economy.

This auto-parts maker is back in the zone

Shares of AutoZone didn't make a big move on Tuesday morning, falling a fraction of a percent. However, the auto parts retailer showed signs of a strong performance in its most recent quarter, showing that yet another niche of the retail sector is having positive results.

Person with a clipboard in a shop full of auto parts and tools.

Image source: Getty Images.

AutoZone reported a 31% rise in revenue in its fiscal third quarter as customers returned to its stores in droves. Same-store sales were up 28.9% year over year, and earnings per share saw an even bigger jump, soaring 84%. AutoZone said that stronger sales coupled with cost-control measures helped power the bottom-line advance.

Strategically, AutoZone has worked to tap into opportunities in the commercial business more effectively, and those efforts have paid off for the company. Although the commercial business comes with slightly lower profit margins, the potential for more sustainable revenue and the resulting boost to growth rates is worth that trade-off in the auto parts retailer's eyes.

AutoZone is building new stores both in the U.S. and internationally and management feels confident about its future prospects. That has helped the stock perform well over the past year and could continue to power further share-price gains throughout 2021 and beyond.

Cracker Barrel looks hungry

Meanwhile, Cracker Barrel Old Country Store saw considerable volatility in its share price Tuesday morning. The combination retail-restaurant stock initially jumped to a 3% rise but then gave up its gains to fall 3% later in the morning.

Cracker Barrel's fiscal third-quarter results showed impressive gains. Revenue jumped 65% from year-ago levels, with comparable restaurant sales climbing 56.5% and comparable retail sales more than doubling year over year. Perhaps more impressively, Cracker Barrel's retail operations have started seeing gains compared to results from two years ago, long before the COVID-19 pandemic played any factor in its business. Comparable retail sales for the quarter were up 10.8% from two years before, including a greater-than-20% jump in comps for the month of April.

Cracker Barrel even made income investors happy. The company restored its quarterly dividend of $1 per share, expressing confidence in its financial condition to allow it to start returning capital to shareholders again.

Guidance for the coming quarter was favorable, and Cracker Barrel is ready to take some of its cash flow to pay down debt and improve its balance sheet. After having gone through a tough time, many will find it encouraging that Cracker Barrel is getting itself back up to full strength again.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AutoZone, Inc. Stock Quote
AutoZone, Inc.
AZO
$2,218.67 (1.07%) $23.48
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,832.54 (0.09%) $29.07
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,140.06 (-0.12%) $-5.13
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$12,657.55 (0.00%) $0.00
Cracker Barrel Old Country Store, Inc. Stock Quote
Cracker Barrel Old Country Store, Inc.
CBRL
$100.24 (3.79%) $3.66

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

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