In good times and bad, one basic luxury never went out of style – a good, old fashioned American breakfast. Americans have a love affair with breakfast. Generally it’s good, filling and cheap. The restaurant chains that cater to this demographic have been great performers. They have defied the economic downturn. I see continued gains for the sector since I love their business model and their breakfasts.
Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) signifies country breakfast at its best. The company’s 621 Cracker Barrel Old Country Stores are spread across 42 states. The restaurants are located along interstates and cater to road travelers. The menu is based on traditional Southern recipes.
In the latest earnings report, the company beat estimates on both the top and bottom lines. Earnings per share came in at $1.02 whereas estimates were calling for only $0.94. Revenues came in at $640.4 million for the quarter. Revenues for next quarter are estimated to be $664.6 million.
The company also announced that they were increasing the quarterly dividend from $0.50 per share to $0.75, a 50% increase. On an annualized basis, that gives the stock a yield of 3.1%. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has tripled its dividend since 2011.
For Mother’s Day of this year, the company recorded its highest sales day in history. This really shows customer loyalty when diners are taking their mothers there for Mother’s Day. It’s a special day of the year and further supports the customer satisfaction that Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) offers its customers. No doubt many went for Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)’s new multi-berry pancakes.
IHOP to breakfast at DineEquity Inc (NYSE:DIN)
DineEquity Inc (NYSE:DIN) owns and franchises International House of Pancakes (IHOP) and neighborhood chain Applebee’s. When it comes to breakfast, you can’t beat IHOP and their pancakes. IHOP has been serving breakfast for 55 years and its menu offers 65 different signature, made-to-order breakfast options.
For dividend investors it pays to know that the company has paid a dividend for the past two quarters. The current dividend amounts to $3 annually and a yield of 4.1%. DineEquity Inc (NYSE:DIN) has also initiated a $100 million stock buyback program. The stock is up almost 52% in the past year.
First quarter earnings came in at $1.14 per share compared to expectations of only $1.01 per share. The company is in the process of transitioning from a focus on a company-owned stores to a franchise model. Over the long-term, this should reduce earnings volatility and increase cash flow. The company has been steering funds towards remodeling its restaurants. At the end of the first quarter, the company had remodeled 54% of its restaurants. By the end of the year, that figure is expected to be 70%.
Investors want to keep an eye on activist Scout Capital Management. They now own 1.1 million shares or 5.7% of the company. Billionaire Michael Dell is also invested in DineEquity Inc (NYSE:DIN) with 2.3 million shares, a 12.1% stake.
Make sausage with Bob Evans Farms Inc (NASDAQ:BOBE)
Bob Evans Farms Inc (NASDAQ:BOBE) owns and operates 560 Bob Evans Restaurants in 19 states. The company also makes breakfast sausage under the Bob Evans and Owens brands.
In the first quarter Bob Evans Farms Inc (NASDAQ:BOBE)s agreed to sell its Mimi’s Cafe business for $50 million. With this sale, the company will focus on remodeling its Bob Evans Restaurants. By doing so, the company hopes to grow earnings per share 8% to 12% annually.
The focus at Bob Evans Farms continues to be its “Farm Fresh Refresh” remodel program. The company still has 233 stores that need to be remodeled. According to the company, same-store sales at restaurants that have had the remodel are outperforming stores that haven’t undergone the remodel.
Bob Evans Farms Inc (NASDAQ:BOBE) continues to be a very shareholder-friendly company in terms of dividends and share repurchases. Last year, the company paid out $93 million to shareholders via dividends and share buybacks. The current annual dividend is $1.10 per share for a yield of 2.4%.
In the first quarter of this year the company reported earnings of 27 million, or $0.97 per share. In the fourth quarter, the company only earned $22 million, or $0.76 per share. For the rest of the year, the company is anticipating revenues of $1.4 billion. Analysts had only been forecasting $1.37 billion. This is a bullish sign that the rest of the year looks strong for Bob Evans Farms Inc (NASDAQ:BOBE).
Denny’s Corporation (NASDAQ:DENN) celebrates America’s love for bacon
Denny’s describes itself as a full-service pancake house/coffee shop/fast casual family restaurant chain. Most of its restaurants are franchised. There are over 1,600 restaurants under the Denny’s brand. The restaurant is known for always being open and never closing. Denny’s is also known for its varieties of bacon for breakfast and its Baconalia menu.
Denny’s is trying to adapt to healthier eating habits by offering a get fit program. Instead of Denny’s Grand Slam, they’re offering a Fit Slam. The Fit Slam has less than 550 calories and is a healthier alternative to the regular menu. Denny’s is hoping healthier fare will give it a boost like it did for Subway.
In the first quarter of this year, Denny’s beat earnings estimates. The company earned $0.08 per share versus estimates of $0.07 and $0.06 in the prior year. Denny’s reported revenues of $114.49 million compared to expectations of $112.71 million. The company’s gross margin over the past 12 months is 37.7%. The operating margin comes in at 12.1% and net margin at 4.9%.
Foolish assessment
I think all four stocks represent great plays on America’s love for breakfast. Each company is well-run and have great brand recognition and a loyal customer-base. As these companies continue to remodel and improve menu items, they’ll continue to reward shareholders in the long-run.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Cracker Barrel Old Country Store.
The article Don’t Skip Breakfast With These Stocks originally appeared on Fool.com.
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