What Happened?
Shares of restaurant company Cracker Barrel (NASDAQ:CBRL) jumped 21.9% in the morning session after the company served up a standout second quarter (fiscal 2025), crushing Wall Street's estimates on revenue, EPS, and EBITDA. Adjusted EBITDA rose by 19.6%, driven by strong restaurant sales growth and pricing optimization that helped offset inflationary pressures. Looking ahead, the company raised its full-year sales and adjusted EBITDA guidance to a range above prior estimates, signaling confidence in growth. With the broader restaurant industry feeling the pinch from economic pressures, execution will be key to keeping this momentum going. Overall, this was a solid quarter, with encouraging outlook for the remainder of the fiscal year.
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What The Market Is Telling Us
Cracker Barrel’s shares are extremely volatile and have had 30 moves greater than 5% over the last year. But moves this big are rare even for Cracker Barrel and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 14.7% on the news that the company announced updates related to its strategic transformation plan and capital allocation strategy. Specifically, the Board of Directors declared a quarterly dividend of $0.25 per share of the company's common stock, down more than 80% from the previous dividend of $1.30.
In addition, the company expected Q3 and Q4 2024 financial results to be below its previous expectations, mainly due to weaker-than-anticipated traffic. In line with the plan, Cracker Barrel provided FY'2027 sales outlook of approximately $3.8 billion to $3.9 billion and adjusted EBITDA of approximately $375 million to $425 million. Adjusted EBITDA in FY'2025 was expected to be in line with, or slightly lower than, FY'2024 results, with gradual improvement in the second half of fiscal 2026 and further acceleration in fiscal 2027.
On a more positive note, it maintained its current share repurchase authorization, which has $138 million remaining. Overall, the updates provide challenging aspects that the market might find tough to digest in the short term.
Cracker Barrel is down 21% since the beginning of the year, and at $43.40 per share, it is trading 40.3% below its 52-week high of $72.73 from March 2024. Investors who bought $1,000 worth of Cracker Barrel’s shares 5 years ago would now be looking at an investment worth $327.36.
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