Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Jack in the Box Inc. is Jumping Out of the Box

Jack in the Box  (NASDAQ: JACK  ) can't be kept inside a box anymore. The San Diego-based company released its 2014 results after the market close on May 14 and, at first blush, its numbers were impressive. Jack reported $18.3 million in earnings from continuing operations this quarter, or $0.43 per diluted share. That's up from $15.1 million, or $0.33 per diluted share, in the year-ago period. Investors took notice as Jack's stock rose 2.2% on May 15, opening at $53.45 per share and closing at $55.20. With its share price popping up, clearly Jack in the Box can't be contained anymore. 

What's happening at Jack in the Box? What is driving its business, and how does it look going forward? Does Taco Bell, the subsidiary of Yum! Brands  (NYSE: YUM  ) , keep Jack up at night?

What's in the box?
While its namesake restaurant performed impressively, Jack's best results came from its Mexican restaurant, Qdoba. Same-store sales, a measure of how stores open more than a year are performing relative to a previous period , grew 0.7% for the quarter at Jack in the Box restaurants, compared to 0.1% for the year-ago period. At its Qdoba restaurants, same-store sales grew an impressive 7% for the quarter, compared to a decrease of 1.3% for the year-ago period.

Furthermore, the company's foreseeable future looks promising. Jack's guidance for the rest of fiscal year 2014 expects a same-store sales increase of 1.5-2.5% at its namesake stores, while it expects Qdoba restaurants to be up 3-4%. It plans to open ten new Jack in the Box restaurants and fifty Qdoba restaurants by the end of the fiscal year. It now expects operating earnings per share of $2.25-$2.35 for this fiscal year, compared to operating EPS of $1.82 for fiscal 2013.

To show that Jack in the Box has confidence in its business going forward, the company's board of directors also approved an initial quarterly dividend of $0.20 per share. Chairman and Chief Executive Officer Lenny Comma explained this decision by saying, "The transformation of our business model for the Jack in the Box® brand is nearly complete, resulting in more stable and predictable cash flows."

Qdoba vs. Taco Bell?
One of Qdoba's direct competitors is Taco Bell. This year, Taco Bell aggressively promoted its breakfast menu, which also competes with Jack in the Box's breakfast services. Even with the publicity surrounding Taco Bell's breakfast, Jack in the Box did not appear concerned. On the May earnings call, Comma noted:

 [W]e did not see a negative impact to our breakfast day part with the launch of the Taco Bell breakfast. In fact, late night and breakfast continue to drive the improvement in our comps. In addition to that, as we progressed into the beginning of the quarter, we've seen acceleration in both breakfast and late-night...

And then as far as the impact that Taco Bell is having on the industry, I would just emphasize that our breakfast has always been 24 hours. At the end which I think it's a huge equity and then we also do serve a very freshly prepared breakfast with fresh cracked egg. Not everybody does that, we think it's a differentiator and it does change the execution of that product....So I can only assume that the folks that are selling more heat and eat and sort of not freshly prepared foods are getting affected by Taco Bell more so than the ones who are giving more freshly prepared foods.

Box it up in a bow?
So what does the future hold for Jack? The outlook seems bright for investors, and this reflects in Jack in the Box's price; its P/E is 38.20, which is a bit pricey compared to the industry-average P/E of 23.50. If its Qdoba restaurants continue to perform well, as expected, and Taco Bell and its breakfast do not have a concerning impact on it, then Jack should be an attractive place for investors.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2973709, ~/Articles/ArticleHandler.aspx, 8/31/2015 9:31:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Johnny Chen

Johnny Chen is a very common name, with an uncommon background. Born overseas, raised near Metro Washington DC, educated (and accumulating too many degrees) in Virginia, Kentucky, Massachusetts, and California, Johnny Chen finds himself somewhat surprised that friends and colleagues come to him seeking investment advice. After many comments along the lines of "You really should write down what you said and publish it," he's decided to finally take that step.

Today's Market

updated 2 days ago Sponsored by:
DOW 16,643.01 -11.76 0.00%
S&P 500 1,988.87 1.21 0.00%
NASD 4,828.33 15.62 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 3:59 PM
JACK $81.77 Up +0.28 +0.00%
Jack in the Box CAPS Rating: ***
YUM $81.82 Down -0.45 +0.00%
Yum! Brands CAPS Rating: ****