Jack in the Box falls after 2010 guidance lowered

AP News
Posted: Nov 19, 2009 2:14 PM

Shares of Jack in the Box fell Thursday, after the fast-food chain predicted that its 2010 profit would be lower than Wall Street expected.

Jack in the Box, based in San Diego, said Wednesday that it would earn 2010 profit in a range of $1.90 to $2.10 per share, well below the $2.21 per share that analysts now estimate. On Wednesday, the analyst consensus had been even higher at $2.31.

Shares fell $1.68, or 8.4 percent, to $18.35 in afternoon trading.

RBC Capital Markets analyst Larry Miller said the lowered guidance would not change his expectations of $2.04 per share in 2010 profit. But he did lower his price target to $22 from $25.

Still Miller said Jack shares are cheap and its long-term potential is "compelling as Jack continues to transform its business model into one that generate higher cash flows and return on investment."

Miller maintained a "Sector Perform" rating. He said the shares are likely to be volatile as sales at stores open at least a year decelerate.

Cowen & Co. analyst Paul Westra also kept a "Neutral" rating on the shares, saying the lowered guidance reflects the tough economic environment.

Morgan Keegan analyst Robert Derrington maintained an "Outperform" rating and said that Jack had stayed competitive despite troubles in the restaurant industry as management had positioned the chain well with its menu selection and prices.