Jack in the Box (NYSE:JBX), the fast-food chain with the round-headed, clownish corporate spokesman, is on a roll. But four quarters in a row of beating analyst expectations are on the line Tuesday, when the company reports earnings for the third quarter of fiscal 2006. Will Jack stumble? Or will he continue his Street-beating ways? Read on to get a handle on what to expect.

What analysts say:

  • Buy, sell, or waffle? Eight analysts say "hold," and one says "buy." That single "buy" is from SunTrust Robinson Humphrey's analyst, who's new within the past month. The other analyst positions have not changed in at least the past three months.
  • Revenues. Those who make the predictions are giving Jack 8.9% growth over last year, to $642.82 million for the quarter.
  • Earnings. Analysts are betting on catching Jack, with flat year-over-year earnings of $0.66 per share.

What management says:
Last quarter, Linda Lang, chairwoman and CEO, commented, "We're doing a better job of meeting the expectations of our core customers and are attracting new customers to our restaurants, which we attribute to the addition of high-quality products." With same-store sales up 4% at Jack in the Box locations for that quarter and 3.1% the year before, I tend to agree with her.

Even more impressive, wholly owned Qdoba Mexican Grill restaurants enjoyed 5.6% comp growth, on top of 14.6% in the previous year. The 300th Qdoba was expected to open just a week ago.

What management says:
Despite some slight slippage in the rolling 12-month gross margin, operating and net margins are holding steady. Sales growth has, with one recent exception, been fairly impressive. Note, though, that if the company exactly meets both the revenue and earnings predictions, that would mean a significant drop in margins for the quarter.

Margins %*

1/03

4/05

7/05

10/05

1/06

4/06

Gross**

69.0

68.7

68.4

68.4

68.2

68.3

Operating

6.2

6.1

6.0

6.2

6.0

6.0

Net

3.5

3.5

3.5

3.7

3.5

3.5

Sales Growth %***

10.3

11.6

9.0

1.3

11.0

8.5
*Trailing-12-month data for the quarter ending in the month indicated.
**Based on gross profit defined as company-owned restaurant sales less cost of food and packaging.
***Year-over-year comparison for the quarter ending in the month indicated.
All data from relevant company 10-K and 10-Q filings.

One Fool says:
The company's primary chain, Jack in the Box, is located mostly in the West and Southwest, but is beginning to expand into the Midwest and East as the company plans for expansion and a broader nationwide presence. It plans to grow primarily through franchises, as it aims to increase the franchise store count from the current 25% level to 35% or more by the end of 2008. Meanwhile, Qdoba, a very successful purchase back in early 2003, is present across most of the country.

The company appears able to handle the apparent slowdown in the restaurant industry as a whole, and I would not expect that to change in the immediate future. It has shown over the past couple of tough quarters that it can grow both same-store sales and traffic. It has also shown it can beat analyst expectations. Check back tomorrow to see whether the company can do so again.

Competitors:

  • Burger King (NYSE:BKC)
  • Chipotle Mexican Grill (NYSE:CMG)
  • McDonald's (NYSE:MCD)
  • Wendy's (NYSE:WEN)

Sink your teeth into any of our investing newsletter services. You can sample any of them free for 30 days.

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