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Jack in the Box Inc. Message Board

  • john.heil2 john.heil2 May 13, 2010 12:40 PM Flag

    Dime's worth of difference

    I just got off the conference call. Yes indeed, had they simply signed that contract for the sale of those 21 refranchised units a week earlier, there would have been a ten cent higher number than was reported, 42 cents versus 32 cents. This reality is one reason the stock is behaving pretty well today despite the downgrade. Jerry talked pretty confidently about "mid point" guidance holding, given commodity costs budgeted thus far and expectations. Margins should comfortably support the consensus $1.95 estimate. I was really encouraged by this review by management, which I believe to be one of the best in the entire restaurant industry. The economy, of course, is always a wildcard but likely we can look for some meaningful comp improvements in fiscal 2011. G&A is behaving really well, and other costs are in line. I can see some nice leverage kicking in about a year from now. So you buy the stock at times like this, you do not sell. Sometimes in this business we forget that the market is a discounting mechanism.

    All the best, Big J in L.A.

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    • The S&P action references only the bond rating. It has nothing to do with the common stock as they do not follow it. JACK acts like a typically sold out stock, given the decent enough quarter and still with a very low PE ratio. Looking a year out, what's not to like as the year over year comp figure steadily improves. And I am close to moving up my date for the expected spinoff of Qdoba. I had thought that probably they do this in fiscal 2012. Now I think it quite possible the spinoff takes place sometime in fiscal 2011, probably after the first two quarters operating results are announced. I say this because comps are really strengthening at Qdoba. And the analogy with Chipotle is compelling. Looking five years out, I see both these companies sharing a very healthy market sector of the casual dining space. Today you are buying Qdoba for virtually nothing. But there is intrinsic value here, looking out to 2011, perhaps as much as $3.00 - $4.00 a share. This assumes it is received in the marketplace as Chipotle was several years ago when McDonalds spun it off.

      Big J in L.A.

    • John,

      I listened to the call too and nobody said directly that the EPS number would have been .10 higher the way you assert. I suggest you relisten to that part of the call if that is what you are basing your long position on.

      In fact why do you think there were so many downgrades after this report if you were correct about the treatment of this one accounting issue? There were numerous analysts who called in w/ questions and they are all smart enough to catch this .10 treatment and factor that into their models. You make it seem like you caught something that people who are paid to analyze this company missed and therefore mistakenly downgraded the stock.

      I'll go w/ the downgrades, the decling sales, the lack of a robust value menu to compete w/ the ample competition and the greasy overpriced food, which all equals a sell and stay away until there is a sign of improvement, if ever.

      • 1 Reply to squirreltrainer1
      • Now now young fella, here's your lesson for the day. There was some initial doubt about whether that huge refranchising payment should have, as a practical matter, theoretically been counted in the second quarter. They did not quantify that ten cents number until the conference call. A sure sign nobody knew the exact number is the price action of the stock. As soon as that was confirmed, and despite the downgrade, the stock stabilized and went higher.
        As for their food, it is far superior to any other QSR and any analyst will tell you. The rap is that maybe they are too good at product innovation and combining so many price points. Only time will tell on that score. I suggest you dine at JACK's to get a real taste of the matter. Spouting off such inanities gets you no respect or credence whatsoever. My 40 years in the business and many of those working as a security analyst, gives me the insight and conviction to back up the truck if the shares should gravitate back to the 22 area. Big J in L.A.

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