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Monro posts record 2Q results and receives a 'Buy (1)' rating

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BB&T Capital Markets reiterated its "Buy (1)" rating for Monro Muffler Brake Inc. following Monro's record-setting second-quarter financial results.

Monro posted net income of $7.7 million on sales of $119.9 million for the second quarter of its fiscal 2009, which ended Sept. 27, 2008. That compares to income of $6.5 million on sales of $112 million for the same period last year.

Both fiscal 2009 totals were second-quarter records for the company.

For the first six months, Monro recorded net income of $15.5 million on net sales of $240.3 million. Both were first-half records.

"Monro has once again demonstrated the strength of its company operated model," says Tony Cristello, senior vice president of equity research for BB&T. Part of its financial success stems from a strong showing in the Northeast, "but at the end of the day, we still believe that the largest driver remains the consistent service and value proposition offered at the store level."

Price increases and growth in the average ticket more than offset a 2.5% decrease in traffic, he says.

Although Monro, historically aggressive on the acquisition front, has been more conservative in the last year and a half, Cristello says the company "expects to close on a mid-sized acquisition by the end of the third quarter (Dec. 31, 2008)."

He estimates the acquisition will add 20 to 30 shops to the company's total of 709 stores, and add anywhere from $10 million to $35 million to Monro Muffler Brake's revenue, "depending upon the mix of service and tire stores."

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