Rivian (RIVN) vs. Tesla (TSLA): Can the EV Underdog Match the Giant's Success Story?

Posted on by The INO.com Team

Tesla, Inc. (TSLA) accomplished what many believed to be an impossible feat by establishing itself as a prominent electric vehicle (EV) manufacturer entirely from scratch. This achievement positioned Tesla to challenge and compete with major players in the automotive industry.

Rivian Automotive, Inc. (RIVN) shares similar aspirations, aspiring to emulate TSLA’s success. However, investors eagerly anticipating Rivian’s potential to replicate Tesla’s trajectory must closely monitor whether Rivian can address significant challenges in 2024.

Establishing an automobile manufacturing company is particularly challenging due to its capital-intensive nature. This endeavor involves building extensive manufacturing facilities, procuring expensive materials, hiring a substantial workforce, and investing significant time in coordination.

Moreover, navigating regulatory requirements, especially concerning vehicle safety, adds another layer of complexity, as obtaining approvals for road-ready automobiles necessitates stringent compliance measures. Thus, the process of building an automobile manufacturer is not only laborious but also requires substantial financial resources and regulatory adherence.

It took TSLA several years before it could generate consistent profits, a milestone the company reached in 2020. Starting in 2014, Tesla experienced a notable increase in net losses, accompanied by a rise in research and development (R&D) expenses. The electric carmaker, founded in 2003, finally posted its first full year of net income of $721 million in 2020, in contrast to prior losses.

However, during this period, Tesla didn’t face significant competition in the EV market, making it the primary choice for consumers interested in EVs. This relatively unchallenged position allowed Tesla to focus on building its brand and technology without immediate pressure from its dominant peers.

In contrast, RIVN faces a more daunting challenge as it strives to achieve profitability in a market with more players and a competitive landscape different from TSLA’s early years. This means that Rivan’s journey to success is not only challenging and costly but also happening in a market environment that demands strategic adaptation and innovation.

Is Rivian on the Path to Becoming the Next Tesla?

RIVN has made significant strides toward establishing itself as a major player in the EV industry, boasting infrastructure capable of supporting its planned 2024 production target of approximately 57,000 vehicles. For the full year 2023, the company produced 57,232 vehicles and delivered 50,122, surpassing the management’s 2023 production guidance of 54,000 vehicles.

As Rivian’s production and manufacturing progress improved throughout the last year, it showcased its capacity as a legitimate automaker. Moreover, on March 7, 2024, the auto company introduced R2, R3, and R3X product lines built on its new midsize platform.

The launch of new products, including R2 and R3, designed to embody the company’s performance, capability, usability, and affordability, can bring it an expanded market reach, drive higher sales volumes, and offer a competitive edge. Rivian’s design and engineering teams are highly focused on innovating not just the product features but also its approach to manufacturing to achieve substantially reduced costs.

Despite this, Rivian still lags far behind Tesla in a critical investor metric: profitability. Rivian is far from achieving profitability, with its losses significantly exceeding those incurred by Tesla during its initial stages of developing its EV business.

In 2023, while generating substantial revenue of $4.40 billion, Rivian incurred a staggering cost of sales totaling $6.40 billion. This means that Rivian incurred losses for every EV it sold, highlighting an unsustainable business model that requires addressing for long-term viability.

The company reported a net loss of $1.52 billion for the fourth quarter that ended December 31, 2023. The last quarter of 2023 reflected a greater discrepancy between production and deliveries compared to previous quarters and recorded a 10% fall in deliveries.

Also, the company has been burning through cash to ramp up production of its product lines. As of December 31, 2023, RIVN’s cash and cash equivalents stood at $7.86 billion, compared to $11.57 billion as of December 31, 2022. Its cash burn comes at a time when demand for EVs has slowed, with Tesla CEO Elon Musk warning that high interest rates are making cars unaffordable.

“We firmly believe in the full electrification of the automotive industry, but recognize in the short-term, the challenging macro-economic condition,” said RJ Scaringe, Founder and CEO of Rivian.

Elon Musk further made remarks about RIVN’s product design, acknowledging its merit but emphasizing the company’s challenge of scaling up production while maintaining positive cash flow. He pointed out that his rival could face the risk of bankruptcy within six quarters unless significant cost reductions are implemented.

Musk emphasized the urgent need for massive cost-cutting measures to ensure the RIVN’s survival in the competitive automotive market.

Challenges Lie Ahead for Rivian in 2024

RIVN’s outlook for 2024 is influenced by economic and geopolitical uncertainties, particularly the impact of exceptionally high-interest rates. The company plans to maintain its production target at 57,000 vehicles, consistent with 2023 levels. For the full year, Rivian anticipates significant capital expenditures of $1.75 billion and an adjusted EBITDA loss of $2.70 billion.

Amid mounting losses and an increasingly competitive EV market, RIVN announced in February that it would lay off 10% of its salaried workers. Previously, on two different occasions, the EV maker laid off about 6% of its workforce in an effort to reduce its losses.

“Our business is facing a challenging macroeconomic environment — including historically high interest rates and geopolitical uncertainty — and we need to make purposeful changes now to ensure our promising future,” chief executive RJ Scaringe wrote in an email to employees.

Rivian’s cash burn is one of the primary challenges for the company. Its cash burn is unsustainable as it expands R2 and R3 capacity, prompting management to announce a reduction in capital expenditures, specifically in Georgia. Last month, Rivian announced that it would be pausing the construction of its $5 billion manufacturing plant in Georgia to cut down costs.

CEO RJ Scaringe said that production of the R2 will begin at RIVN’s existing plant in Normal, Illinois. While presented as a cost-saving initiative, the decision raises concerns regarding the company's ability to manage its operations effectively.

Bottom Line

RIVN has made significant strides in establishing itself as a major player in the EV industry. The company’s infrastructure supports its ambitious production targets, and the introduction of new product lines like R2 and R3 showcases its commitment to innovation and market expansion. These moves can potentially drive higher sales volumes and enhance its competitive edge.

However, Rivian faces substantial challenges, particularly in achieving profitability. Despite generating decent revenue, the company’s cost of sales has resulted in significant losses, raising questions about the sustainability of its business model. The company’s cash burn is a pressing concern.

While Rivian has shown promise in its technological advancements and product offerings, its path to profitability and long-term viability hinges on its ability to address its cost structure, manage cash flow effectively, and navigate a challenging macroeconomic environment in the EV industry, including high interest rates, supply chain disruptions, and intensified competition.

So, it’s crucial to emphasize that investors should focus on Rivian’s execution toward profitability in 2024. While a shift from losses to profits is significant, consistent progress toward that turning point will determine Rivian’s potential to match Tesla’s success. Investors should also closely monitor Rivian’s efforts to improve operational efficiency and manage costs effectively.

If Rivian can demonstrate steady progress toward profitability, there’s still a chance it could match its rival Tesla’s some of the success achieved. However, given its massive losses, alarming cash burn, and an uncertain outlook, it could be wise to approach RIVN with caution for now.

FedEx's Bullish Move: $5 Billion Stock Buyback Plan Ignites Investor Enthusiasm

Posted on by The INO.com Team

FedEx Corporation (FDX), a leading provider of transportation, e-commerce, and business services, plans to repurchase $5 billion worth of its shares as its cost-cutting measures contribute to increased profits, leading to a significant surge in the company's stock, marking its most substantial gain in a year.

FDX’s shares have soared more than 18% over the past month and nearly 30% over the past year.

This newly authorized $5 billion share repurchase program comes in addition to the existing $600 million available for repurchase under the 2021 authorization. During the third quarter of fiscal 2024, the courier company completed a $1 billion accelerated share repurchase (ASR) transaction. About 4.1 million shares were delivered under the ASR agreement.

FedEx also intends to repurchase an additional $500 million of common stock during the fourth quarter, bringing the fiscal 2024 buyback total to $2.5 billion. The company’s cash on-hand was $5.60 billion as of February 29, 2024.

“DRIVE is having a real impact, supporting both operating income growth and margin expansion,” said John Dietrich, FDX’s executive vice president and chief financial officer. “As we look ahead, we’re focused on continuing to deliver on DRIVE and our commitments to support long-term shareholder returns.”

Third-Quarter Earnings Beat

For the third quarter ended February 29, 2024, FDX reported revenue of $21.74 billion, slightly missing the analysts’ estimate of $22.08 billion. Despite lower revenue, third-quarter income and margin improved, mainly due to the execution of the company’s DRIVE program and the continuous focus on revenue quality.

FedEx’s non-GAAP operating income grew 16.2% year-over-year to $1.36 billion. Its non-GAAP net income came in at $966 million, an increase of 11.7% year-over-year. The company posted a non-GAAP EPS of $3.86, compared to the consensus estimate of $3.48 and up 13.2% from the previous year’s quarter.

“FedEx delivered another quarter of improved profitability in what remains a difficult demand environment, reflecting outstanding service and continued benefits from DRIVE,” said Raj Subramaniam, FDX’s president and CEO.

“We are making meaningful progress on our transformation, while strengthening our value proposition and improving the customer experience. I've never been more confident in our path ahead as we build a more flexible, efficient, and intelligent network,” Subramaniam added.

Cost-Cutting Efforts

Over the past year, workforce reductions at FedEx totaled around 22,000 jobs, said CFO John Dietrich on a conference call with analysts. As per the company, most of these job cuts have come through attrition.

For the full-year fiscal 2024, FDX plans to reduce its planned capital spending to $5.4 billion, compared to the previously announced $5.7 billion. The logistics company expects permanent cost reductions related to the DRIV program of $1.8 billion in 2024.

In April last year, FedEx announced restructuring its business segments into one unit, embarking on a cost-cutting plan of $4 billion by 2025. The shipping giant expects the new operating structure to be entirely implemented by June 2024, bringing FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies under the Federal Express Corporation umbrella.

Meanwhile, FDX’s Board of Directors approved an increase of 10% in its annual dividend of $0.44 per share to $5.04 for the fiscal year 2024. Its annual dividend translates to a yield of 1.78% at the prevailing share price. Moreover, the company’s dividend payouts have grown at a CAGR of 14.2% over the past five years.

Bloomberg Intelligence analyst Lee Klaskow said, “FedEx gave investors plenty to celebrate especially as it relates to showing progress towards reducing structural costs and its announced $5 billion share repurchase program.”

Bottom Line

Despite a challenging demand environment, FDX delivered another quarter of enhanced profitability, reflecting outstanding service and continued benefits from its DRIVE program. FedEx’s Board of Directors also announced a new $5 billion share repurchase program as a continued cost-saving initiative to help drive profits.

FedEx's ambitious stock buyback plan is a testament to the company's confidence in the effectiveness of its cost-cutting initiatives and restructuring efforts, potentially suggesting optimistic long-term growth prospects.

TD Cown analyst Helane Becker said in a research note that the last reported results marked the third consecutive quarter in which FDX’s operating income grew despite dropping revenue, indicating the logistics company’s cost-cutting efforts are working.

FedEx CEO Raj Subramaniam currently oversees a comprehensive restructuring of the company’s delivery networks. A significant part of this strategic plan has involved reducing the workforce by tens of thousands of jobs. The restructuring plan, announced in April last year, represents a departure from founder Fred Smith’s long-standing strategy of maintaining a two-network approach.

“We are making meaningful progress on our transformation,” Subramaniam said. The overhaul plan (DRIVE program) is expected to make permanent cost reductions of $1.8 billion in fiscal 2024.

The results from the plan demonstrate FedEx’s efforts to revitalize its Express division, which has faced challenges due to the shift by consumers and businesses toward sending more mail and packages via ground. FedEx reported that both its Express and Ground divisions saw considerable benefits from lower structural expenses during the quarter.

On March 22, 2024, Evercore ISI analyst Jonathan Chappell maintained a Buy rating on FDX and set a price target of $351. In addition, FedEx got a Buy rating from Deutsche Bank’s Amit Mehrotra.

Based on the recent insider activity of 48 insiders, corporate insider sentiment is optimistic about FDX stock. Over the past year, there were about 32 open market insider buys. Most recently, in January this year, Richard W. Smith, President and CEO of Airline and International, FedEx, bought 2,000 shares for a total of $287,080.

Given its outstanding financial performance and bright growth prospects, investing in FDX for potential gains could be wise.

To Buy or Not to Buy: Decoding Neutral Rating on Boeing (BA) Stock

Posted on by The INO.com Team

Last week, BofA Securities analyst Ronald Epstein lowered his price target from $225 to $210 on The Boeing Company (BA) stock. The analyst also maintained a Neutral rating on the stock after a presentation by the aerospace giant’s Chief Financial Officer and Executive Vice President, Brian J. West. The presentation occurred last Wednesday at the Bank of America Global Industrials Conference.

Boeing’s Near-Term and Medium-Term Outlook

Brian West’s recent presentation hinted at potential shifts in Boeing’s cash flow and debt structure, as highlighted by BofA Securities. Due to the company’s decision to retain airplanes for a longer duration and comprehensively address traveled work, BA anticipates a negative impact on revenue, earnings, and cash flows for both the quarter and the year.

During the quarter, Boeing’s free cash flow usage is projected to be between $4 billion and $4.50 billion, higher than its initial January estimates. This increase in cash outflow is driven by lower deliveries, reduced volume at Boeing Commercial Airplanes (BCA), and a negative mix from inventory airplanes.

Additionally, some working capital pressures, including inventory challenges and receipt timing, will affect the aviation company’s financial performance in the short term and may not fully recover by the end of the year. 

Boeing has not been able to effectively address near-term financial outcomes due to the work surrounding its stability.

West added in the presentation that BA’s long-term strategy prioritizes generating cash flow post-investments in its growth initiatives, followed by reducing debt on its balance sheet. Maintaining an investment-grade rating remains a key priority.

Although achieving the targeted $10 billion free cash flow will take longer than initially anticipated, likely extending into the 2025-2026 timeframe, the company believes its current actions will enhance our long-term positioning and stability.

Moreover, Boeing's defense business is also a focal point of concern. Previously, in October, West expressed confidence in the defense segment’s contribution toward achieving the $10 billion free cash flow target, albeit slightly lower than expected.

However, acquiring Spirit AeroSystems Holdings, Inc. (SPR) is expected to raise Boeing’s consolidated debt, which currently stands at $52.30 billion, potentially leading to heightened cash flow challenges. Spirit has faced outflows in recent years, and there is also a need to enhance manufacturing quality.

Bottom Line

BA’s fourth-quarter 2023 results beat analysts’ expectations. For the quarter that ended December 31, 2023, Boeing’s revenue came in at $22.02 billion, surpassing analysts’ estimate of $21.08 billion. This compared to revenue of $19.98 billion in the same quarter of 2022.

BA’s core operating earnings were $90 million, compared to a core operating loss of $642 million in the prior year’s quarter. The company also posted a core loss per share of $0.47, compared to the consensus estimate of $0.79, and narrowed 73.1% year over year. However, its free cash flow came in at $2.95 billion, down 5.8% from the previous year’s period.

Despite topping analyst estimates in the last reported quarter, the aerospace company holds off on its 2024 guidance as it grapples with the fallout from an accident involving an Alaska Airlines 737 Max 9, which suffered a door “plug” blowout during a flight in early January.

“While we often use this time of year to share or update our financial and operational objectives, now is not the time for that,” Boeing CEO Dave Calhoun said in a message to employees. “We will simply focus on every next airplane while doing everything possible to support our customers, follow the lead of our regulator and ensure the highest standard of safety and quality in all that we do.”

Further, BA CFO Brian West recently spoke at the Bank of America Global Industrials Conference, where he reassessed the company’s medium-term and long-term financial outlook and strategic decisions and hinted at several concerning factors.

West talked about the anticipated negative impact on revenue, earnings, and cash flows for the quarter and the year due to the company's decision to retain airplanes longer and address traveled work comprehensively. He added that the increase in cash outflow in the quarter is attributed to fewer deliveries, decreased volume at BCA, and an unfavorable mix of inventory aircraft.

Moreover, working capital pressures, including inventory challenges and receipt timing, are expected to persist in the short term and may not be fully recovered by the end of the year, leading to a lower full-year free cash flow projection.

Despite challenges in managing near-term financial outcomes due to stability concerns, the company is committed to strengthening its position, achieving long-term targets, and enhancing predictability for our customers and investors. However, this process will require time and concerted efforts.

The recent presentation highlighted several challenges, including anticipated adverse impacts on the company’s cash flow and debt profile. Given the current circumstances, BofA Securities’ decision to revise the price target on BA stock and adopt a cautious stance with a “Neutral” rating seems justified.

Therefore, waiting for a better entry point in this stock could be wise now.

Investor Alert: Starbucks' Legal Challenges Raise Questions About Stock Viability

Posted on by The INO.com Team

Earlier this month, three Starbucks Corporation (SBUX) customers, Maria Bollinger, Dawn Miller, and Shunda Smith, filed a $5 million class-action lawsuit alleging discrimination in the U.S. District Court for the Eastern District of California against SBUX. Their argument centered around SBUX charging extra for non-dairy milk and unfairly targeting individuals with lactose intolerance – a condition that affects their ability to consume dairy.

The lawsuit alleges an "excessively high" fee, specifically a surcharge of $0.50 to $0.80, on beverages at SBUX that offer non-dairy and lactose-free options such as soy, almond, coconut, and oat milk. The Americans with Disabilities Act (ADA) considers lactose intolerance, a condition that impacts 30 million to 50 million Americans, as qualifying for disability status.

Plaintiffs contended that SBUX violated their rights under the ADA and California Unruh Civil Rights Act - an act prohibiting businesses from discriminating against state residents based on age, race, sex, and disability, among other criteria, because they charge extra for plant-based milk in their beverages.

However, an SBUX spokesperson emphasized that domestic customers indeed enjoy non-dairy options without any additional charges, stating that "In U.S. Starbucks stores, at no additional cost, customers can add up to four ounces of non-dairy milk to hot or iced brewed coffee or tea, cold brew and Americano beverages."

Such controversy could corrode consumer trust and loyalty, precipitating decreased sales and profitability. Should an indictment of violating anti-discrimination laws befall SBUX, substantial financial penalties combined with brand image damage are probable. These factors could significantly influence shareholder value over the long term.

Safety Concerns Threaten Reputation and Consumer Trust

Apart from the abovementioned conflict, the company is also grappling with other challenges. This month, the federal safety agency reported that it is recalling over 440,000 Nestlé S.A. (NSRGY)-manufactured SBUX-branded mugs sold during the winter holidays. The action follows numerous user complaints of burns or lacerations.

The U.S. Consumer Product Safety Commission stated that microwaving or filling the mugs with extremely hot liquid caused them to overheat or shatter, presenting burn and laceration risks. 

SBUX-branded mugs' recall due to safety hazards significantly threatens the company’s reputation and consumer trust. The incident could result in potential legal and financial repercussions and tarnish the company's image, consequently affecting future merchandise sales and its bottom line.

The Fallout From Controversies Over International Conflicts

Since Israel's military offensive in Gaza, global protests and grassroots boycott campaigns have impacted SBUX. After the company sued its workers' union over a social media post in October, an activist called to boycott SBUX products.

The chain accused that by using their company name and logo on X (previously Twitter) to express solidarity with Palestinians, Workers United had violated its trademark. In response, Workers United filed its court document, accusing SBUX of defamation, specifically suggesting that the union endorses terrorism and violence.

Due to the unresolved disagreement, SBUX found itself targeted by both pro-Palestine and pro-Israel protests. CEO Laxman Narasimhan acknowledged this in a year-end letter published highlighting vandalism instances experienced in global cities and within U.S.-based SBUX stores.

Denying political affiliations, SBUX rebutted social media rumors suggesting ties to governmental or military operations.

The escalating protests and boycotts could threaten the brand's reputation, sales, and consumer trust. These challenges could also affect SBUX's financial standing and future viability as it navigates the complexities of international conflicts and societal pressures.

Starbucks' Sales Woes and Investor Concerns

In its fiscal 2024 first quarter release, SBUX reported that global same-store sales had only risen by 5% year-over-year in the three months leading up to January. The company also downgraded its guidance, projecting an increase between 4% and 6% in global same-store sales for the full year of 2024.

On an earnings call, Narasimhan asserted that the company observed a negative impact on its business in the Middle East. He added that since mid-November, the chain's U.S. sales have also lagged, partly due to public "misperceptions" about SBUX's stance on the conflict.

Some analysts, however, attribute the sales slowdown to a broader decline in sentiment among U.S. consumers and an economic recovery stall in China – its second-largest market with approximately 6,500 outlets. They point out that others noticed this trend coincided with a new winter menu launch, which could have underwhelmed customers.

Furthermore, the Frappuccino provider recently admitted to an unsuccessful beta test of their non-fungible token loyalty website named Starbucks Odyssey. Concurrently, Executive Vice President and CFO Rachel Ruggeri chose to sell 3,221 shares on March 4, 2024.

Over the past year, Ruggeri sold 5,246 shares without making any purchases in the SBUX stock. Her transaction history reveals consistent selling patterns with no recorded insider buys within that period. On the other hand, ten insider sales occurred at the company during this same timeframe, indicating an overarching trend among its insiders.

Bottom Line

The coffee company has been committed to ethically sourcing and roasting high-quality arabica coffee since 1971, and it stands today as the world's premier specialty coffee roaster and retailer, with over 38,000 stores globally. However, shares of SBUX have plunged 4.8% over the past month.

While the company's reputation and legal standing might improve in the future, its present fundamentals appear weak. Thus, it could be wise to wait for a better entry point into the stock.

Cracker Barrel (CBRL) Dividend at Risk: A Close Look at Financial Performance

Posted on by The INO.com Team

With a market cap of roughly $1.46 billion, Cracker Barrel Old Country Store, Inc. (CBRL) has established itself as a major player in the restaurant industry. Its establishments feature restaurants paired with gift shops, serving breakfast, lunch, and dinner with dine-in, pick-up, and delivery options.

However, the company is not only popular for its iconic dining experience but also for its commitment to returning value to shareholders through consistent dividend payouts. Last month, CBRL declared a quarterly dividend of $1.30 per share, payable to its shareholders on April 12, 2024.

Its annual dividend of $5.20 translates to a staggering 7.89% yield on the prevailing price level, while its four-year average dividend yield is 4.13%. Over the past three years, CBRL’s dividend payouts have grown at a CAGR of almost 26%.

Despite the allure of the company's annual dividend yield among investors seeking steady dividend income, its dividend payout ratio of approximately 105.56% raises notable concerns, particularly in light of the declining trend in its earnings per share since reaching a peak in early 2021.

CBRL allocated 94% of its cash flow toward dividends and distributed over 116% of its profits in the past year to shareholders. These metrics reflect the percentage of earnings that a company distributes as dividends, and in CBRL’s scenario, these figures are notably elevated.

Typically, traditional dividend-paying stocks strive to maintain a payout ratio closer to 75% of earnings to ensure sufficient resources for sustaining and improving operations. However, CBRL’s notably high payout ratio raises concerns about its dividend sustainability.

In its latest financial results, the company reported revenue of $935.40 million, revealing a marginal year-over-year increase, while its adjusted net income and adjusted earnings per share plunged 13% and 13.1% year-over-year, reaching $26.53 million and $1.19, respectively.

As of January 26, 2024, CBRL’s cash and cash equivalents stood at $12.60 million, reflecting a substantial decline of 74.5% from $49.40 million as of January 27, 2023.

Commenting on the company’s latest quarterly results, CBRL’s President and Chief Executive Officer, Julie Masino, noted that despite margin pressures, there was encouragement from the improvement in traffic trends during the quarter. Masino attributed this improvement to investments in labor and advertising, alongside a focus on enhancing the guest experience.

Furthermore, Masino highlighted ongoing progress in the strategic transformation efforts, with teams actively engaged in initiatives to enhance relevancy, deliver beloved food and experiences to guests, and drive profitability growth.

However, despite the company's endeavors to enhance profitability growth, its current profitability levels continue to lag behind industry norms. For reference, the stock’s trailing-12-month net income and levered FCF margins of 2.43% and 1.09% are 48.8% and 80.4% lower than the 4.76% and 5.53% industry averages, respectively.

In its fiscal 2024 outlook, the company anticipates total revenue between $3.50 billion and $3.60 billion. Expansion plans include opening two new CBRL stores and 9 to 11 new Maple Street Biscuit Company units. Capital expenditures are estimated to be between $120 million and $135 million.

Meanwhile, Wall Street analysts foresee a 29.7% year-over-year drop in its EPS in the upcoming quarter, while revenue is expected to be $836.92 million.

Bottom Line

Despite CBRL’s highly appealing annual dividend yield and growth trajectory in dividend payouts over the past years, the company's notably elevated payout ratio of over 100% raises significant concerns about its dividend sustainability.

While CBRL's latest financial results show slight revenue growth and demonstrate efforts to improve traffic trends and enhance guest experiences, its profitability remains below industry norms.

Moreover, the company has witnessed a declining trend in earnings per share. With CBRL dedicating most of its earnings toward dividend payments, the dropping earnings per share cast a shadow of doubt on the company’s ability to maintain its dividend payments at the current price level.

Furthermore, the expansion initiatives and associated capital expenditures in fiscal 2024 highlight the company’s goals to invest in its future growth. While such investments can enhance revenue and profitability, they also impose short-term financial obligations and cash outflows.

The expansion investments, including opening new stores and units, require substantial financial resources, potentially elevating operational expenses and limiting the available funds for dividend payments.

Overall, the combination of substantial capital expenditures, dropping liquidity levels, declining earnings per share, and ongoing operational costs associated with expansion plans heighten the vulnerability of CBRL’s future dividend payments.

That said, considering the possibility of dividend cuts in the near term, investors seeking classic dividend-paying stocks could keep a close eye on the shares of CBRL for a more favorable entry point.