What: Jack in the Box Inc (NASDAQ:JACK) shares were looking tasty to investors this morning, flying higher after the company turned in better-than-expected results in its third-quarter earnings report. As of 10:45 a.m. EDT, the stock was up 10.1%.
So what: The fast-food chain, which also owns Qdoba Mexican Grill, roared past earnings estimates with an adjusted profit of $1.07 a share against the consensus of $0.87 and up from $0.76 a year ago. Revenue improved 2.6% to $368.9 million, also beating expectations at $367 million.
Same-store sales growth in the quarter was modest, increasing 1.1% at Jack in the Box restaurants and 0.6% at Qdoba, but at a time when analysts are talking about a "restaurant recession," the upside results were enough to propel the stock higher. The chain also benefited from falling food prices, which helped drive the outsize gains in profit.
CEO Lenny Comma said, "Earnings per share exceeded our expectations in the quarter," and he said he was particularly pleased that Jack in the Box "closed the gap" with the industry in same-store sales. In another bullish sign, results improved steadily throughout the quarter. Earlier in the year, Comma had complained that McDonald's all-day breakfast launch had taken some customers, pushing down sales, but the company seems to have since recovered.
Now what: Looking ahead, Jack in the Box expects a slight improvement in comparable sales in the current quarter, with 1%-2% growth at both chains. Efforts to cut G&A costs are also under way, which should help boost profits.
For the full year, management guided EPS at $3.65-$3.75, up from $3.00 a year ago and better than the analyst consensus at $3.57. Despite weak same-store sales growth, the company's strategy of refranchising and cutting costs along with falling food prices have lifted profits. While that pattern can't continue forever, the market seems to be content with the upward progression for now.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.