Will the Bob Evans Farms (BOBE) Earnings Report Quiet Shareholder Activists? CBRL, DENN & DIN

The Q4 2014 earnings report for restaurant stock Bob Evans Farms Inc (NASDAQ: BOBE), a potential peer of Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL), Denny's Corporation (NASDAQ: DENN) and DineEquity Inc (NYSE: DIN), is scheduled for after the market closes on Tuesday. Aside from the Bob Evans Farms report, it should be said that Cracker Barrel Old Country Store, Inc reported Q3 2014 earnings on May 28th (revenues and profit rose on lower expenses); Denny's Corporation reported Q1 2014 earnings on April 28th (they had their strongest quarter of same-store sales at company restaurants in over seven years); and DineEquity Inc reported Q1 2014 on May 1st (earnings rose on stronger sales). However, Bob Evans Farms recently replaced three board members with new independent directors after facing criticism from shareholder Sandell Asset Management Corp.

What Should You Watch Out for With the Bob Evans Farms Inc Earnings Report?

First, here is a quick recap of Bob Evans Farms' recent earnings history from Yahoo! Finance:

Earnings HistoryApr 13Jul 13Oct 13Jan 14

EPS Est	0.64	0.57	0.55	0.57
EPS Actual	0.71	0.58	0.35	0.30
Difference	0.07	0.01	-0.20	-0.27
Surprise %	10.90%	1.80%	-36.40%	-47.40%

 

Back in early March, Bob Evans Farms Inc's shares sank after the company's third quarter results trailed expectations and after it lowered its fiscal 2014 profit view for the second time this year. The weather impacted same-store sales of -1.8% plus the company estimated a sustained and severe winter weather impact of approximately 3%. However, its 47 core restaurants located in Florida achieved same-store sales of 4.4% - benefiting from "the Farm Fresh Refresh program, value sales layers, and the absence of severe winter weather." The Chairman/CEO commented:

"The third quarter of fiscal 2014 was especially challenging due to a number of factors, including: sustained and severe winter weather of a magnitude not seen in many years, particularly in our core Midwest markets; continued higher than projected sow costs; and higher than projected fiscal 2014 startup inefficiencies following the expansion of the BEF Foods' Sulphur Springs, Texas, plant. However, we expect these issues will be confined to fiscal 2014, and as such will not impact fiscal 2015 results."

This time around and according to the Yahoo! Finance analyst estimates page, the consensus expects revenue of $333.31M and EPS of $0.41 - down from the consensus EPS of $0.42 seven days ago, $0.43 thirty days ago, $0.44 sixty days ago and $0.45 ninety days ago.

On the news front and in late April, Sandell Asset Management Corp, the beneficial owner of approximately 1.7 million shares or 6.8% of Bob Evans Farms, released a public letter to the shareholders of the Company to discus its slate of eight independent candidates for BOBE's Board of Directors. The letter noted:

Bob Evans has dramatically under-performed its own selected peer group over a 1-year, 3-year, 5-year, and 10-year time period, as well as other peers. We believe this unacceptable track record is the direct result of the failed policies and a wasteful culture sanctioned by a stale and entrenched Board of Directors that in our view has been unable to exert effective management oversight.

Bob Evans Farms did replace three board members, but that has not satisfied Sandell Asset Management Corp's CEO who stated:

"We believe that today's announcement is a half measure taken as a knee-jerk reactionary step once the Company felt the pressure of shareholders and the spotlight of public opinion trained on them following the announcement of Sandell's highly-qualified and experienced independent slate of Directors. In our view, this is yet another cynical attempt by the Board of Directors of Bob Evans to pose as a Company that embraces good governance after forcing shareholders to suffer years of under-performance under the supervision of what we view as a stale and entrenched Board. We would remind shareholders that this is the second time in recent months that even basic change has occurred only after outside actions put pressure on the Board to react."

In early May, it was announced that Paul F. DeSantis, the Bob Evans Farms' Chief Financial Officer and Treasurer, had resigned to accept a position with another company.

What do the Bob Evans Farms Inc Charts Say?

The latest technical chart for Bob Evans Farms shows a downward trend since late last year:

Moreover, its easy to see why investors are unhappy with Bob Evans Farms' performance as Cracker Barrel Old Country Store, Inc, Denny's Corporation and DineEquity Inc have outperformed it:

Cracker Barrel Old Country Store, Inc has recently produced a multiple bottom on the technical charts while Denny's Corporation has been trending downward since December and DineEquity Inc has been bouncing around the $80 per share level:

What Should Be Your Next Move?

With activist shareholders breathing down the necks of Bob Evans Farms' management, the coming earnings report will be interesting to watch to see if there are signs that current management is doing something to turn things around. If not, we can expect more demands for more radical changes – something that would probably be a good thing for shareholders over the long term.