Bull of the Day: Jack in the Box (JACK) – Bull of the Day

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Jack
in the Box JACK was
a momentum play last year and today it returns
as the Bull of the Day, albeit a unique story that may have slightly
higher
risk due to some reorganization within the company after noticing a
continuous
decline in traffic due to macro concerns and conservative spending in
certain area
restaurants.

After an extensive operational review
and financial analysis
of its Qdoba Mexican restaurants, Jack in the Box has made the decision
to close
67 (10% of total) underperforming restaurants under its Qdoba Mexican
Grill
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
to
incur about $28 million as impairment charges related to the closings
and
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
enhance
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
company-owned
restaurants. They will also be replacing those closed Qdoba locations
with nearly
60-70 new Qdoba restaurants in 2014.

Earnings
Trends
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
closer,
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
of August,
the stock seems to be getting some favorable upgrades from analysts,
both in
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,
cutting
weak stores and clever advertizing make this stock worth your time and
money
for a longer term trade.

The
Charts
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
them.

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
and
$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
been
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
between
1 and 1.5% daily, so they are slightly less volatile than the
S&P 500.

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
take profits.

I’d look to JACK versus their
competition like Wendy’s WEN,
Burger King BKW and even McDonald’s MCD.

Jared
A Levy is one of the most highly sought after traders in the world and
a former
member of three major stock exchanges. That is why you will frequently
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