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Jack in the Box Inc. Message Board

  • perryao perryao Nov 3, 1999 2:05 PM Flag

    bot @ 19 7/16...

    hope I caught the falling knife by the handle!

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    • JBX moves appear to be related to a hand full of
      institutional investors unloading in anticipation of earnings
      announcement.

      Ironically, this selling was triggered on
      the same day as big MCD anaylsts meeting. Any insight
      to what was said at that meeting would be
      appreciated.

      In looking over the trading range of JBX past
      several weeks, JBX has been thinly traded, which has
      caused the stock to move up and down on very limited
      volumne. That is to say no significant market for or
      against the stock.

      When institutional parties
      sought to shed hundreds of thousands of shares, they
      forced the price considerably lower to the point of
      generating buyers. In the alternative, if and when the
      decide to move back in it will likely move it higher
      sharply.

      I am hopeful this flight on the eve of earnings is
      based on erroneous analysis of MCD analysts comment and
      not based on leaked JBX data.

      Should JBX meet
      or exceed the concensus, stock should be up
      markedly.

      Wendy's is a good point of reference for Monday's earning
      release. If JBX receives a Wendy's multiple on estimated
      earnings stock should move sharply higher.

      If,
      however, JBX misses the mark, this market has punsihed
      accordingly.

      I believe JBX would have warned if they were going
      to miss the mark.

      This week appears to have
      been a great buying opportunity.

      I have a good
      feeling Tuesday trading will be brisk and positive. I'm
      looking to sell on Wednesday.

    • To be honest, I really don't have much of a clue
      why JBX is having such a significant correction. As
      you know, this just happens once in a while with JBX.
      A combination of relatively low average trading
      volume and a high institutional percentage of
      outstanding stock holdings can cause the unusual swings - up
      and down. Unfortunately, the most recent swing was
      down.

      My only other guess is that there may be worries
      about a negative earnings release this Monday. I'm
      thinking this only because McDonald's shareholders seemed
      very optimistic with McD's comments at their recent
      conference. It's possible their comments scared off some JBX
      shareholders. I really wish I had some more detail on that
      conference.

      Based on JBX IR's comments, it sounds like a
      dissapointing announcement on Monday is pretty unlikely.

    • Thanks for the clarification. Do you have an
      opinion on whether some of this downturn in JBX might be
      attributable to outflows due to sector rotation? If you look
      at the charts of most other restaurant stocks,
      you'll see a similar correction going on in their stocks
      over the past few months, with the exception of
      MCD.

      David

    • >>Also, the 2Q99 provided an unexpected
      $11M in net income from an unusual
      item.<<

      FYI, that unusual item was a non-cash recording. They
      simply had an over accrual and changed their estimmates
      for the future. They were accruing expenses that they
      anticipated paying. Although it is nice that they never had
      to pay those expenses, they also never actually
      received $11M cash.

      Looks like we just have a
      difference in opinion regarding the share buyback program.
      Granted, JBX appears to be a steal right now.

    • You should verify with the Treasury Department if
      you're interested in current cash flow options, as my
      last conversation with Hal Sachs on this subject was a
      while back. But here are my notes on a conversation I
      had with him when the 2Q99 results came
      out:

      >>When we spoke last year after the refinancing (using
      the lawsuit settlement proceeds), he did not foresee
      any further debt paydowns in the near future. (FM has
      been using cash flow to fund their restaurant
      expansion program) However, no one expected sales to be
      this strong, and now they will likely pay down $15 to
      $20 million of their bank debt in FY99. There are no
      plans to increase the number of new stores opening
      under their expansion program, so any excess cash will
      go to pay down debt. They are highly leveraged and
      will remain so for the foreseeable future, but their
      debt to equity ratio has improved dramatically over
      last year, and will continue to improve (at a slower
      pace) this year, especially if sales continue to exceed
      expectations.<<

      (full post is message #762)
      http://messages.yahoo.com/bbs?action=m&board=7082060&tid=fm&sid=7082060&mid=762

      My point is I'd rather see them use that $20M to buy
      up some shares here around $20, which I think is a
      better investment.

      JBX has been using cash flow
      to fund its expansion program at a moderate pace
      that doesn't force them to take on more long term
      debt. Also, the 2Q99 provided an unexpected $11M in net
      income from an unusual item:

      "During the second
      quarter, the company reduced accrued liabilities and
      restaurant operating costs by approximately $18 million,
      primarily due to a change in estimates resulting from
      improvements to its loss prevention and risk management
      programs, which have been more successful than anticipated.
      This unusual item increased net earnings by
      approximately $11 million, net of taxes, resulting in net
      earnings for the quarter of $25 million, or 64 cents per
      diluted share." (from the 2Q99 quarterly
      results)

      As always, do your own research,

      David

    • A company with a large revolving credit facility
      doesn't want a large cash balance. JBX probably has
      around $90 million on their credit facility debt. If
      they have any extra cash, they want to pay down debt
      on the facility rather than have it earn 2% in the
      checking account.

      XTGO, with $90 million in debt
      on the bank facility, there is plenty of room to pay
      down debt. Personally, I don't think a buyback program
      is necessary, at this time. This stock will bounce
      back quick, maybe by next week.

      BOTTOM FEEDER

    • The profile section of Yahoo! only shows $5.2M in
      cash. Not familiar with fast food company balance sheet
      analysis, but the current and short term debt ratios don't
      look that onerous. But $5M cash seems light. Are the
      cash flows strong enough that this is plenty for an
      enterprise of this size?

      PS- sorry to have kept the
      anachronistic "crispy" in my #1 menu choice...the slavic
      masseuse just jogged my memory to the name change. ~Geo.

    • The largest portion of JBX's long term debt
      ($124.8M) is fixed interest (8.4%) bonds that are not due
      until 2008. Even if JBX wanted to pay some of this off,
      they can't, since they're not redeemable until 2003 at
      the earliest. I'm not sure about the rest of the debt
      (long term lease obligations and revolving bank
      credit), but I don't think they have that many options to
      pay down debt further. I suppose they can pay down
      some of the revolving bank credit, but I'd rather see
      them invest in their own company by buying some shares
      while they're on firesale.

      Since the stock
      market is giving JBX such a low P/E, reducing the
      oustanding shares helps boost earnings per share and can get
      the stock moving up. It worked last year and was a
      great return on investment for the company, which paid
      an average of $14.29 per share. It's also a vote of
      confidence by the company that the street usually reacts
      positively to.

    • Mr. Nugent,

      Please do not use your extra
      cash to buy back shares. Pay down the debt. Debt
      almost killed us a few years back. Invest in the balance
      sheet and invest in the growth.

      Disclosure: Long
      term FM/JBX shareholder since $5.00 a share.

    • I'm back!! Been gone for awhile. Out of FM, er JBX. I love your reasoning. I'll probably dabble in JBX tomorrow. Seems like a good entry point. Good Luck to all!

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