Jack in the Box (JACK) shares hit a fifty two week high today on comments from television host Jim Cramer. On Friday, Bank of America (BAC) also raised its price target on the shares to $32. Last week, Jack in the Box presented at the Jefferies 2012 Global Consumer Conference. Below are the highlights of the restaurant chain.
At the end of the second quarter, the company had over 2800 restaurants. Jack in the Box owns two unique fast food restaurant concepts.
Jack in the Box
Jack in the Box is a fast food chain of restaurants throughout the country. There were 2,242 locations at the end of the second quarter. Nearly three quarters of the stores (73%) are owned by franchisees, giving Jack in the Box a steady stream of royalty income. Drive thru sales at Jack in the Box stores account for 70% of sales. The restaurants are open twenty four hours a day and serve a full menu all day. The average check at the restaurants is $6.25.
The growth on Jack in the Box locations has slowed down. The company is forecasting to increase the store count by 2-3% each year. Same store sales are expected to raise 2-3%.
Jack in the Box owns Mexican restaurant chain Qdoba as well. The company has 605 Qdoba restaurants in the United States. Just over half of Qdoba's (52%) are franchised. The average check at the restaurants is $9.74.
Qdoba is focusing on its hand-crafted food preparation. The company has added whole wheat tortillas to cater to health conscious customers. Focusing on money conscious customers, the company also rolled out a "Craft 2 Menu" featuring two perfect portions for one price. The company's Qdoba Rewards and catering programs are also helping the company capture additional sales. Qdoba competes with Chipotle Mexican Grill (CMG) and Taco Bell (YUM).
The long term target is 2000 units in the United States, which would more than triple the company's current count of stores. Through 2015, the company will expand its store count by 15-20% each year. By 2015, there should be over 1200 Qdoba stores in the United States. Same store sales at restaurants open more than a year are forecasted to grow 3-4%.
Fiscal 2011 Sales
In fiscal 2011, Jack in the Box made $282.1 million from its franchises across the United States. The franchises paid $120.8 million in royalties and $161.3 million in rental income. Jack in the Box reported revenue of $2.18 billion for fiscal 2011. Earnings per share last year were $1.61 for Jack in the Box.
Jim Cramer turned positive on the stock, recommending it Friday and again Monday during the trading day. Cramer starts off by calling the company "ideal" based on gasoline prices coming down, commodity costs coming down, and the company moving from a company owned to a franchise based model. Cramer calls the restaurant sector "a logical place" and thinks that Jack in the Box is one of the best in the sector.
By 2015, Jack in the Box is calling for earnings per share of $2.00. Jack in the Box hopes to have a return on invested capital in the mid teens. Free cash flow is set to hit $75 million beginning this fiscal year. Analysts on Yahoo Finance see Jack in the Box earning $1.43 in fiscal 2012 and $1.58 in fiscal 2013.
I have to agree with Cramer on recommending the restaurant sector right now. Despite the European problems, I have still recommended heavyweights like Burger King (BKW) and Yum Brands . There has also been a lot of acquisition activity in the restaurant sector. I pointed out potential restaurant buyout targets in an April article. The growth potential for Jack in the Box is tremendous with Mexican style food becoming more popular in the United States. Jack in the Box can easily triple the base of Qdoba stores. I am bullish on Jack in the Box shares for the long run but would wait for shares to come down.