After years of disappointing performance, CKE Restaurants has put together 15 consecutive four-week periods of increased same-store sales at both restaurant chains. In the latest period, Carl's Jr. revenue jumped an impressive 9.3%, and Hardee's booked a respectable 4.9% increase. High gas prices are not keeping consumers away.
Fueling part of the Carl's Jr. rise is its Loaded Breakfast Burrito. Is a record quarter on the way?
One clue is today's earnings announcement. Earnings of $0.17 a share in the second quarter fell short of analyst estimates by three cents. Because the company earned $0.20 in the previous quarter -- a quarter without the lucrative "summer season" -- it is obvious that operating margins are falling.
You do not need to get too fancy with today's data to understand the stock's fall. Top-tier fast-food operators such as McDonald's
Even after today's fall, CKE Restaurants is trading at 16 times 2004 estimated earnings. Do premium-priced burgers, and a hot "loaded burrito," deserve a premium stock price? Not really, even though it is clear from today's same-store sales numbers that third-quarter sales are off to a fast start (and faster than that of peers).
CKE Restaurants is filling a unique product niche and doing well. Today's fall still leaves the stock selling for a premium to its peers, which does not bode well for near-term share price appreciation.
For more fast food for thought:
Fool contributor W.D. Crotty does own stock in Checkers -- which will probably chide him for calling it second-tier.