What to look for – Solondais

Cracker Barrel Old Country Store (CBRL) is expected to report a year-over-year profit decline on lower revenues when it reports for the quarter ended April 2024. This widely known consensus outlook paints a good picture of the company’s earnings, but comparing actual results to these estimates is an important factor that could impact the near-term share price.

Shares could move higher if these key numbers meet expectations in the upcoming earnings report, due on May 30. On the other hand, if these key numbers are not met, the stock could fall.

While management’s discussion of business conditions during the earnings call will largely determine the durability of the immediate price change and future earnings expectations, it is worth having partial insight into the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

The restaurant operator is expected to post quarterly earnings per share of $0.56 in its upcoming report, representing a year-over-year change of -53.7%.

Revenue is expected to be $826.55 million, down 0.7% from the year-ago quarter.

Estimate the trend of change

The consensus EPS estimate for the quarter has been revised 13.14% down to the current level over the last 30 days. This broadly reflects how analysts covering the data have collectively re-evaluated their initial estimates during this period.

Investors should note that the direction of each analyst’s estimate revisions will not always be reflected in the aggregate change.

Whisper about earnings

Revisions to estimates prior to a company’s earnings release provide an indication of business conditions in the period in which the earnings are expected to be released. Our proprietary surprise prediction model, the Zacks Earnings ESP, is based on this insight.

The Zacks Earnings ESP compares the Most Accurate Estimates to the Zacks Consensus Estimates for the quarter; The Most Accurate Estimate is a newer revision of the Zacks Consensus EPS estimate. The idea is that analysts reviewing their estimates just before an earnings release have the latest information that could potentially be more accurate than what they and other consensus participants had previously predicted.

Thus, a positive or negative ESP reading theoretically indicates the likely deviation of actual earnings from consensus estimates. However, the predictive power of the model is only significant for positive ESP readings.

A positive Earnings ESP is a strong predictor of an earnings beat, especially when paired with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks in this combination deliver a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of its Earnings ESP.

Please note that a negative earnings ESP reading does not mean a loss of earnings. Our research shows that it is difficult to predict earnings growth with any degree of confidence for stocks with negative ESP readings and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How have Cracker Barrel’s numbers changed?

For Cracker Barrel, the Most Accurate Estimate is in line with the Zacks Consensus Estimate, which suggests that there are no recent analyst views that differ from those used as the basis for the consensus estimate. This resulted in an earnings ESP of 0%.

On the other hand, the stock currently has a Zacks Rank of 5.

So this combination makes it difficult to confidently predict that Cracker Barrel will beat the consensus EPS estimate.

Does the history of surprising results have any clue?

When calculating future earnings estimates, analysts often consider how well a company has been able to match consensus estimates in the past. So it’s worth taking a look at the surprise history to gauge its impact on the upcoming issue.

During the most recent quarter, it was expected that Cracker Barrel would post earnings of $1.29 per share when it actually produced earnings of $1.37, delivering a surprise of +6.20%.

The company has beaten consensus EPS estimates twice over the last four quarters.

Bottom line

Improving or lacking earnings may not be the only basis for a stock’s value rising or falling. Many stocks lose value despite good earnings because of other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite losing profits.

That said, betting on stocks that are expected to exceed earnings expectations increases your chances of success. Therefore, it is worth checking the company’s Earnings Rank and Zacks Rank before their quarterly release. Use our Earnings ESP filter to find the best stocks to buy or sell before they report.

Cracker Barrel doesn’t seem like a compelling candidate to beat earnings. However, investors should also pay attention to other factors if they want to bet on or stay away from these stocks ahead of an earnings release.

Expected results of an industry player

Another soon-to-be stock in the Zacks Retail – Restaurants industry, Red Robin (RRGB), is expected to post a loss of $0.41 per share for the quarter ended April 2024. These estimates indicate a year-over-year change of -264 %. Revenue for the quarter is expected to be $397.08 million, down 5% from the same quarter last year.

The consensus EPS estimate for Red Robin has been revised 37.6% down to the current level over the last 30 days. However, the lower value of the most accurate estimate resulted in an earnings ESP of -13.71%.

This combined with the Zacks Rank #5 (Strong Sell) Earnings ESP makes it difficult to firmly predict that Red Robin will surpass the consensus EPS estimate. The company has topped consensus EPS estimates three times over the last four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Cracker Barrel Old Country Store, Inc. (CBRL): Free Stock Analysis Report

Red Robin Gourmet Burgers, Inc. (RRGB): Free Stock Analysis Report

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