Jack Slapped Despite Success

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Throw another one on the pile -- the heap of companies reporting good earnings then getting pasted by the market, that is. Another of yesterday's victims: 8% loser Jack in the Box (NYSE: JBX).

Before we examine Jack's sin, let's take a look at its success. According to the third-quarter press release, sales were up 11% over last year's quarter to $541 million. That's a bit better than the recent results at burger kingpin McDonald's (NYSE: MCD). Comps rose 3.9%, also along the lines of the trend at Mickey D's, and a bit better than Wendy's (NYSE: WEN) recent disappointment.

On the bottom line, earnings nudged up a slimmer 7% to $0.58 per stub, but that was still a nickel better than what the firm had forecast. And this followed a huge upside surprise last quarter.

Here's the problem. Wait, I'm not sure what the problem is. (Sound of deep thought, hamster spinning a wheel.) Sure, fourth-quarter guidance from management came in $0.03 below estimates, but shouldn't the firm get a little credit for the command performance today? Maybe it's just that Jack has been heading nowhere but up since last October, and Mr. Market needs to beat shares down just for grins.

Management revised full-year guidance to $2.18, a penny more than the Street was seeing. With shares going for less than $29 each, Jack already looks cheap, with a P/E of 15. That's less than YUM! Brands' (NYSE: YUM) 17 or McDonald's 19, although these two carry better operating margins.

Still, things could get even better for Jack. For instance, the company is testing a new fast-casual concept, JBX, and lets you put your tab on plastic nowadays, a system that's convenient and tends to pad the bill. Success on both these fronts would lead to even greater rewards for the faithful. If you like food and food stocks, Jack in the Box is worth a closer peek.

Fool contributor Seth Jayson loves to eat but has no position in any company mentioned. View his Fool profile here.