Why Bob Evans (BOBE) Stock Is Falling Today

NEW YORK (TheStreet) -- Bob Evans Farms (BOBE) shares are down -2.3% to $48.65 on Wednesday, continuing the drop the stock experienced in after-market trading on Tuesday, following the release of the company's fourth quarter and full year earnings results.

Sandell Asset Management Corporation, one of the company's largest shareholders, was unhappy with the quarterly results and blamed the disappointing numbers on mismanagement. 

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"Yesterday's earnings release, which was delayed due to previously announced 'weaknesses in internal controls,' in our opinion illustrates both the mismanagement that has been exhibited by Chairman and CEO Steven Davis at the helm of Bob Evans and the lengths that he and his board of directors will go in order to entrench themselves at the expense of shareholders," said Sandell Asset Management.

Bob Evans reported earnings of $11.8 million, or 48 cents per diluted share, 7 cents better than Wall Street analysts had expected, but significantly less than the $19.4 million, or 69 cents per diluted share, the company reported the previous year.

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 strengths can be seen in multiple areas, such as its compelling growth in net income, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 110.4% when compared to the same quarter one year prior, rising from -$55.14 million to $5.72 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.19 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.8%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, BOBE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: BOBE Ratings Report
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