in the Box (JACK - Analyst Report) was
a momentum play last year and today it returns
as the Bull of the Day, albeit a unique story that may have slightly
risk due to some reorganization within the company after noticing a
decline in traffic due to macro concerns and conservative spending in
After an extensive operational review
and financial analysis
of its Qdoba Mexican restaurants, Jack in the Box has made the decision
67 (10% of total) underperforming restaurants under its Qdoba Mexican
brand by the end of fiscal 2013 (ending Sept 29, 2013).
There are currently 647 Qdoba
restaurants worldwide, which includes
340 company-owned units. When all is said and done, the company expects
incur about $28 million as impairment charges related to the closings
approximately $12 million in lease-related costs during fiscal 2013.
Management believes that since the
restaurants were not
doing well, closing them would improve the company’s future profit and
the cash flow position.
Even with the closures, Jack in the
Box is still looking to
open 70-75 new Jack in the Box restaurants in 2013, 40 of which will be
restaurants. They will also be replacing those closed Qdoba locations
60-70 new Qdoba restaurants in 2014.
As a Zacks Rank #1, Jack in the Box is probably doing
something right. At almost 25 times
forward earnings, they don’t appear to be that cheap, but when you look
it’s about the turn around that analysts are expecting in the future.
Jack is expected to deliver 18% year
over year growth on a
decline in revenue (I suspect from restructuring, closures, etc).
Going into their report on the 14th
the stock seems to be getting some favorable upgrades from analysts,
the current and next quarter, but more importantly in FY2013 and FY2014.
Analyst estimates for FY2013 are up 3
cents to $1.64 and up
8 cents for FY2014 over the last 90 days.
ESP for the current quarter is also
positive at 2.63%, when
combined with the Zacks Rank of 1 gives a good indication for a beat.
Some argue the lack of a catalyst for
growth, but I think
that with their diverse offerings and proactive management approach,
weak stores and clever advertizing make this stock worth your time and
for a longer term trade.
JACK has been a slow and steady wins the race type
stock. Interestingly enough, the shares
have whether market volatility quite well, which is why I tend to favor
Shares remain in a bullish channel
and have strong support
around the $39.00 level. Below that the
50 and 200 day moving averages will also provide support at the $38.27
$30.68 areas as well.
Frankly, I would be concerned if JACK
fell below its 50 day
moving average and remained below it for more than 3 days, as it hasn’t
there since November of last year.
Shares are slightly overbought at the
moment with much of
the market, so wait for a pullback before entering. Shares tend to move
1 and 1.5% daily, so they are slightly less volatile than the
Look for the stock to break out of
its current channel to the upside and
into the $50 range over the coming months at which point I'd look to
I’d look to JACK versus their
competition like Wendy’s (WEN - Analyst Report),
Burger King BKW and even McDonald’s (MCD - Analyst Report).
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