Shares of Jack in the Box (NASDAQ:JACK) were moving higher last month after the fast-food chain posted solid results in its fourth-quarter earnings report and surged at the end of the month on a report that it was exploring a sale. As a result, the stock finished the month up 12%, according to S&P Global Market Intelligence.
As you can see from the chart below, those gains came in two distinct surges, each from the news items above.
Jack in the Box shares jumped 6% on Nov. 20 after its fourth-quarter earnings report came out. The company said comparable sales increased 0.5%, and revenue came in at $177.5 million, which was down significantly from the year before due to the sale of the Qdoba chain earlier in the year, but still beat estimates at $174.5 million.
Adjusted earnings per share increased from $0.73 to $0.77, but that missed expectations at $0.85. CEO Lenny Comma said, "The competitive environment remains extremely aggressive, but we continue to avoid deep discounting which we believe is not in the best interests of the long-term health of the brand."
Investors were also encouraged by the fast-food chain's guidance next year as management called for comparable sales growth of flat to 2%, which seemed to be enough to push the stock higher considering intense competition in the industry.
Toward the end of the month, Reuters reported that Jack in the Box was holding talks with private equity firms for a potential sale. Considering the number of M&A deals in the restaurant sector and the earlier sale of Qdoba, a sale wouldn't be that surprising. Jack in the Box did not comment on the report.
Notably, Jack in the Box's comparable sales growth in the fourth quarter was slower than the industry benchmark at 1.5%, a sign, along with its slow profit growth, that its performance is relatively weak. While a sale would lift the share price, those rumors alone seem to be a poor reason to invest in the stock. Considering the business's slow growth and the stock's gains last month, shares now look fully priced.