Bob Evans Farms (BOBE, Financial) posted not-so-impressive results for the second quarter. The company posted a decline in revenue. However, the company posted earnings that came in line with analysts’ estimates. Bob Evans Farms is expecting an improvement in its operations in the future, as it expects its strategic investments to benefit it. Also, Bob Evans Farms is confident of posting decent results going forward.
In the recently reported quarter, Bob Evans posted a total loss of $1 million, or $0.04 a share, as compared to an income of $8.4 million last year. The company’s top line came in at $326.3 million, which fell short of the consensus estimates of $328.6 million.
Expecting better times
Bob Evans Farms is confident that its business will see meaningful progress in the coming days. Management finds the company immune to the existing macroeconomic pressures. But, the recent results reveal another story that Bob Evans is struggling and is facing challenges due to various factors. The restaurant chain is now focusing on various aspects to improve its profitability.
Bob Evans is closely focusing on its remodeling program. Bob Evans is suffering in regions such as the East North Central, the South Atlantic and the mid-Atlantic, which have most Bob Evans restaurants. To get over this, the company has innovative plans to attract more customers. Bob Evans is making good innovations in the breakfast menu.
It is focusing on adding a diverse range of breakfast items that are different from the other brand’s menu. The recent example of addition of Sweet & Stacked platform is the most recent example of the innovation that Bob Evans has done. Moving on to the lunch category, Bob Evans is focused on offsetting the lower satisfactory customer scores that it has received in the past. It is now adding Broasted Chicken and slow-roasted chicken platform in the lunch menu, which is expected to attract more customers.
To improve its services, Bob Evans has introduced an operational improvement program called carry-out acceleration. With this program, the company is focusing on three key elements – enhanced staff selection and training to ensure carry-out team members are multi-skilled and equipped to offer sales oriented friendly, accurate and efficient service. It is also working on its procedures and processes to enhance order efficiency and accuracy. This will help Bob Evans to reduce the rate of incorrect orders.
Making positive moves
For fiscal 2015, Bob Evans Farms is confident of improving sales on the back of many key initiatives. It is considering the launch of Broasted Chicken in the Cincinnati market to be its key growth driver. Bob Evans has also improved its advertising and marketing program to support its Farm Fresh Refresh program and the Own Our Night initiative. Further, Bob Evans is also launching a brand relevant Broaster Box, which will be a signature icon to promote Broasted Chicken in a typical format.
Besides all these, Bob Evans has an aggressive investment plan which is focused on transforming Bob Evans Restaurant and Bob Evans Farms Foods. The company is also expecting good results from an investment of $800 million, which it has made in the past to drive meaningful revenue for the company.
Conclusion
Looking at the fundamentals, with a trailing P/E of 25.81, the company looks slightly expensive. However, the forward P/E of 17.65 shows good earnings growth in the future. With 10% earnings CAGR for the next five years, Bob Evans will show decent growth in earnings. So, investors should consider this stock for the long run as it can improve in the future.
