Jack in the Box Shares Plunged: What You Need to Know
Wed, 24/11/2010 - 12:39 by Brian D. Pacampara
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of fast food chain Jack in the Box (Nasdaq:JACK) tumbled 10% in intraday trading Tuesday after the company posted disappointing quarterly earnings.
So what: Thanks to a $28 million charge related to 40 restaurant closings and increasing input costs, Jack in the Box's profit sank 90% in the fourth quarter. The company also posted a 3.3% decline in same-store sales, reflecting the frustrating headwinds that quick-service restaurants still face.
Now what: While business at Jack in the Box's namesake locations continue to slump, same-store sales at its Qdoba Mexican Grill managed to grow an impressive 5.6%. Management expects similar results from Qdoba next quarter, providing investors with a much-needed bright spot. Qdoba should only become a larger part of the business over time, so the stock's 10-ish P/E -- representing a clear discount to rivals McDonald's (NYSE: MCD),Yum Brands! (NYSE: YUM), and Chipotle Mexican Grill (NYSE: CMG) -- might be too tasty to pass up.
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