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The Right Recipe At Bob Evans

Investors are digging into shares of casual-dining operator Bob Evans Farms (BOBE), whose stock has popped from 22 in November to 29.89 now. "Its recipe for a turnaround appears solid," says David Sowerby, portfolio manager at investment firm Loomis Sayles (LSBRX), which owns shares. Sales at Bob Evans' 585 family-style restaurants in 19 states are on the rise. Profits in its most recent quarter nearly doubled from a year ago, owing to cost cutting, less price discounting, more advertising, and an improved menu. The company, with little Street coverage, beat earnings forecasts in the two previous quarters, notes Sowerby. He sees Bob Evans, which also makes sausages and other food products, sustaining its double-digit earnings growth next year, with the stock hitting 38. Jonathan Waite of KeyBanc Capital Markets (KEY), who tags the stock a "buy," forecasts earnings of $1.21 a share in 2006 (ending Apr. 30) and $1.45 in 2007, compared with $1.04 in 2005. He says the real upside will come from sales and fundamental improvements.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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