Bob Evans In Freefall After Sales Miss: What To Know

• Shares of Bob Evans Farms Inc (NASDAQ: BOBE) hit a new 52-week low of $36.56 on Wednesday.
• Bob Evans Farms reported its second-quarter results on Tuesday in which net sales fell 4.3 percent year-over-year to $230.7 million – short of the $323.3 analysts were expecting.
• Despite the miss, Brian Bittner of Oppenheimer maintained an Outperform rating but lowered his price target to $45 from a previous $50.

Bob Evans Farms earned $0.41 per share in the second quarter on revenue of $230.7 million while analysts were looking for an earnings per share of $0.39 on revenue of $323.3 million.

In a report published Wednesday, Brian Bittner of Oppenheimer commented that his near-term outlook on the shares remains "subdued" as the company's second-quarter comps "missed poorly." Nevertheless, the analyst maintained an Outperform rating with a price target lowered to $45 from a previous $50 as management maintained its 2016 earnings per share guidance.

Commenting on the second-quarter print, Bittner noted that the earnings per share beat was mostly driven by a better BEF Foods performance and lower interest expense. The segment benefited from lower sow costs and a favorable sales mix. Looking forward, a continued shift towards more profitable products (such as side dishes) should help to continue boosting the segment's profits and margins, especially at a time when sow prices remain a "material sensitivity driver."

On the other hand, Bob Evans' Restaurant segment saw its profit decline as a same-store sales decline of 3.2 percent was worse than the 0.5 percent decline Wall Street analysts were looking for. In fact, the poor performance prompted management to lower the "expectation bar" for the remainder of the fiscal year (from a positive low-single-digit to a negative low-single-digit) which Bittner suggested is still "aggressive."

Bittner continued that Bob Evans' stock recovery rests on the ability of the company's newly named CEO Saed Mohseni to turn around the core restaurant division. However, negative trending comps may limit the stock's expansion in the near-term.

Finally, Bittner pointed out that Bob Evans' remains on track to monetize its real estate assets as planned and also increased its stock repurchase authorization plan to $250 million from a previous $150 million.

Bottom line, Bob Evans' is "armed with a vibrant" new Board of Directors and incoming CEO and an improving earnings cycle could unfold if/when sales re-accelerate.

Image Credit: By Billy Hathorn (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons