Cracker  Barrel (NASDAQ: CBRL) stock has been lagging behind its sit-down restaurant peers despite a solid rebound in the industry. Reports from Darden Restaurants International (NYSE: DRI), Ruth’s Hospitality Group (NASDAQ: RUTH), Bloomin’ Brands (NASDAQ: BLMN), and Texas Road House all concur (NASDAQ: TXRH). These companies reported solid results for calendar Q4, and many gave upbeat, if not above-consensus, guidance for the year driven by traffic and operational improvement.

This should increase Cracker Barrel's stock as it has done for the others, which is an opportunity for investors. The stock isn’t exactly a value trading at its current levels, about 17.5X its earnings outlook, but the outlook is expecting growth and the consensus figures look low for this high-yield stock. 

The Institutions Bought CBRL After The Q2 Release 

The institutions have been buying CBRL stock on balance since the pandemic bottom. The institutions have been net buyers for every quarter save 1, and their activity ramped up following the Q1 earnings report. The institutions bought $0.70 billion net in the quarter, worth about 30% of the market cap and is a significant figure. This action has the bottom in prices near $100 and sets the market up for another rebound for summer 2023. The buying is broad in nature; dozens of purchases are listed on Insidertrades.com’s tracking pages, and numerous owners holding more than 1% of the stock are included in that activity. 

Institutional activity is a telling indicator of market sentiment. Still, that bullishness is not yet seen in the analysts' activity. 8 analysts are rating the stock a Hold with a price target of $109. That is about 7% above the current price action, which is near $100, and is firming in the near term. The most recent commentaries following the Q2 release included 4 boosted price targets and 1 upgrade to Buy from Hold. The upgrade is from Argus, which set a target of $126 or roughly 25% above the current price. If this trend continues following the Q3 report, the stock will likely move higher, but how high is the question? 

Among the stock’s attractive qualities is the dividend. Cracker Barrel stock pays over 5.0% with share trading near $100, 3X the broad market and in line with bond yields with the added bonus of capital growth (assuming the restaurant rebound doesn’t stall). One of the factors holding the stock price down is the cash flow situation which became tight during the pandemic. 

The company cut the dividend to save on cash flow and has since brought it back and raised it to the pre-pandemic level, but the payout ratio is still high. The payout ratio is running near 87%, which is hard to manage given the increase in debt. Debt is not a major concern, and leverage remains low, but distribution increases may not resume until 2024, when profitability is expected to return to pre-pandemic levels. 

The Analysts Lower The Bar For Q3 Results 

The analysts expect revenue growth near 7% for Q3, but they have been trimming their estimates since the Q2 report and guidance increase, so this bar may be low and easy to beat. Investors should expect a positive response from analysts and possibly the institutions. 

The chart favors higher prices, but there is still a significant hurdle to cross. While the institutions support price action at the bottom of a range, the top still provides resistance. This may not cease until the Q3 report is released and may linger afterward if the report is not good enough. Regardless, investors looking to get into a high-yield stock may target the low end of the range for entry points.