On June 26 after market close, CKE Restaurants (NYSE:CKR), operator of Hardee's and Carl's Jr., will announce earnings for the first quarter of fiscal year 2007. With a freshly redesigned logo and increased menu variety, one might expect CKE to serve up good things. Read on to find out what's on the grill.

What analysts say:

  • Buy, sell, or waffle? Three analysts following the company rate this as a buy or a strong buy, while one says to hold.
  • Revenues. The sole analyst with an estimate is looking for a 4.1% increase over last year, to $485.2 million.
  • Earnings. Four analysts have a consensus forecast of $0.21 in earnings per share. This is down $0.03 from last year's result.

What management says:
In discussing the end of the last quarter and fiscal year, Andrew F. Puzder, president and chief executive officer, said, "As result of our continued profitability, we were able to reverse most of our deferred tax asset valuation allowance, resulting in an income tax benefit of $139 million in the fourth quarter of fiscal 2006. We believe this change in our deferred tax asset valuation allowance marks an important milestone in the turnaround of the Company and the start of a new phase of growth."

Mr. Puzder discussed distinguishing Hardee's and Carl's Jr. from other fast-food stores in a release announcing a new logo. "Over the past several years," he said, "we have committed ourselves to making Carl's Jr. and Hardee's the ultimate destinations for premium quality, sit-down restaurant style hamburgers in a fast-food venue. With our 100 percent Angus beef line of Six Dollar Burgers and Thickburgers -- as well as our more recent addition of Hand-Scooped Ice Cream Shakes and Malts -- we believe we have achieved this goal."

I must admit that the idea of a shake from something other than a machine is appealing. And what it adds to a Thickburger must be seen to be believed. However, with renewed concerns about healthier fast food, can its calorie-laden burgers' popularity continue?

What management does:
Between fiscal 2000 and 2004, the company went through five years of annual net income losses ranging from $29 million to $194 million. Over the past two years, it has reversed that, keeping operating and net income positive for the past six quarters. However, year-over-year sales growth has slipped recently.

Margins %*

11/04

1/05

5/05

8/05

11/05

1/06

Gross**

70.4

70.4

70.4

70.4

70.6

70.7

Operating

(0.9)

2.5

2.5

4.2

4.3

5.1

Net

(2.7)

1.2

1.5

2.9

3.1

3.8****

Sales Growth %***

4.2

11.2

2.3

1.7

(1.4)

(3.7)
* Trailing-12-month data for quarter ending in month indicated.
** Based on gross profit defined as sales less cost of food, without revenue from franchisees.
*** Year-over-year comparison for quarter ending in month indicated.
**** Not including a one-time tax benefit of $137.3 million for the year recognized in the fourth quarter, fiscal 2006.
All data from relevant company 10-K and 10-Q filings.

One Fool says:
Going forward, management must concentrate on sales. Same-store sales at company-owned stores decreased two quarters ago, but rose last quarter. Revenue from both company-owned stores and franchisees fell year over year last quarter, but increased sequentially after having dropped the previous quarter. With already-announced comps gains of 5.6% for the first quarter, the company seems to have growth back on track.

The stock has climbed fivefold since its lows of 2003, though it is still well below the highs of early 1998, before the company started losing money. If CKE continues performing as it has for the past year or so, its stock might eventually begin to rise toward those tasty levels again.

Competitors:

  • McDonalds (NYSE:MCD)
  • Wendy's (NYSE:WEN)
  • Burger King Holdings (NYSE:BKC)

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Fool contributor Jim Mueller does not own shares in any company mentioned.