NEW YORK (TheStreet) -- Shareholders of Bob Evans (BOBE) headed for the exits after a poor full-year earnings report and soft guidance. While the results were mediocre and estimates are coming in well below analysts' targets, investors will want to stick around to see how a battle between Bob Evans and Sandell Asset Management plays out.

Sandell Asset Management began its pressure on Bob Evans back in September 2013. The company, which acquired a 5%-plus stake in Bob Evans, pressured the company to make changes to resurrect the undervalued company. Essentially, Sandell wanted Bob Evans to spin off its retail food product brand and also sell its real estate. The plan was to maximize shareholder value. Sandell put a price target of $73 to $84 on shares if the plan was followed.

The recent fourth quarter provided ample ammo for Sandell in its fight to make changes and control the board of directors at Bob Evans. Same-store sales declined 4.1% in the fourth quarter, with the winter weather to blame. The full year saw a same-store sales decline of 2.1%.

How to Trade Apple Stock Before the July 22 Earnings Report

Goldman Sachs Earnings Reflect Banking Sector's Troubles

Albemarle Boosts Battery Business in $6.2B Deal

As Markets Hit Highs, a Technical Look at Bank of America, Six Others Set to Report

Despite the weakness at Bob Evans' 561 restaurants in 19 states, its BEF Foods retail division continues to shine. The unit saw pricing and supply issues, but managed to grow revenue 3.4% in the fourth quarter and 6.6% for the full year.

BEF Foods produces items under the sausage, refrigerated-sides, frozen and food-service categories with the Bob Evans name. The products are available in over 30,000 retail stores across the country. Bob Evans expects this number to hit 40,000 by 2018.

Spinning off BEF Foods appears to be the easiest play for Bob Evans to please Sandell and reward shareholders. The unit is seeing strong growth and represented only 28% of Bob Evans' full-year sales. For fiscal 2015, Bob Evans has forecasted BEF Foods to post revenue growth of 16% to 18%.

What better time to spin off this division than now -- when it is in high growth mode?

With recent merger and acquisition activity in the food sector, the spun off BEF Foods could even be acquired shortly after hitting the open market.

A divesture of the retail division would allow Bob Evans the ability to focus on its restaurants. It could concentrate on its Bob Evans Express brand, which it is currently licensing for airports and malls. The core Bob Evans company would be able to provide a consistent dividend and trade in-line with market peers.

Over the last five years, shareholders have seen Bob Evans shares rise 58% to current levels. Despite this nice return, shares are trading down 28% from their 52-week high. Shares are also trading at 67% less than the value Sandell envisions. Investors should consider following along with Bob Evans for the ride.

At the time of publication, the author held no positions in any of the stocks mentioned.

Follow @chriskatje

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates BOB EVANS FARMS as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BOB EVANS FARMS (BOBE) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strongest point has been its expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BOB EVANS FARMS has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, BOB EVANS FARMS reported lower earnings of $1.16 versus $2.91 in the prior year. This year, the market expects an improvement in earnings ($1.93 versus $1.16).
  • BOBE, with its decline in revenue, slightly underperformed the industry average of 7.3%. Since the same quarter one year prior, revenues slightly dropped by 7.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The share price of BOB EVANS FARMS has not done very well: it is down 6.53% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • The gross profit margin for BOB EVANS FARMS is rather low; currently it is at 20.71%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.98% significantly trails the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 51.9% when compared to the same quarter one year ago, falling from $27.02 million to $13.01 million.