Zacks_Analysts' Blog : BAGL to Reward Shareholders - Analyst Blog

In the past, Lakewood, Colorado–based Einstein Noah Restaurant Group Inc (BAGL), known for its Einstein Bros. Bagels stores, has used most its cash in reducing the financial obligation of the company. The company will now be committed on enhancing the shareholder value by a number of initiatives such as share repurchase, dividend, etc. over the long run.

The company operating under the names of Einstein Bros. Bagels, Noah's New York Bagels, and Manhattan Bagel brands announced a quarterly cash dividend of 1.25 cents payable on April 15, 2011, to stockholders of record on March 1, 2011.

Einstein Noah also stepped up shareholder value through a share-buyback program. The company’s board of directors has authorized a buyback of up to $20 million of its common stock over a two-year period.

Additionally, Einstein remains focused on the growth of the company. In 2011, it plans to open 10 to 14 new corporate stores and relocate an additional 10 to 14 stores. Moreover, to drive traffic the company continues to explore new coffee program. As a result, the company has raised its capital expenditure guidance from $17 million to $19 million in 2010 to $28 million to $30 million in 2011.

Einstein has recently completed its multi-year process of reducing debt by discharging its 85.6 million prior credit facility before expiry and $3.6 million of preferred stock. The company has also obtained a new $125 million five year senior credit facility, including a term loan of up to $75 million and a revolving credit facility of up to $50 million. The new credit facility raised available fund, which can be used to reward the shareholders.

Einstein has reduced its debt and preferred stock from $220 million at the end of 2003 to $93 million as of September 28, 2010. The company has also improved its shareholder equity position from a deficit of $95 million at the end of fiscal 2003 to positive $73 million at the end of third quarter of 2010.

We appreciate the company’s effort to return cash to shareholders. We are also encouraged by the company’s focus on expansion apart from deleveraging its balance sheet.

Einstein currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock.

Primary competitors of Einstein include Biglari Holdings Inc. (BH) and Bob Evans Farms Inc (BOBE).