Oppenheimer Gives Color On Jack In the Box Following Weaker Quarter, Lower Guidance

Jack In The Box

reported a confusing F4Q10 EPS number below our estimates and consensus. However, if we add back all nonrecurring gains/charges, F4Q10 EPS would have topped estimates. Equally confusing was management's operating EPS outlook for FY2011, which at first glance is significantly below consensus and Oppenheimer's forecast; however, it also includes expected nonrecurring impairment & other charges. Oppenheimer believes JACK should trade at a discount to MCD. Therefore, a fair multiple for JACK should be around 15x a "clean" operating EPS number, plus slightly greater than $3.00 in EPS stemming from a DCF value of the next several years of refranchising gains. Oppenheimer has a Perform rating on JACK JACK is trading 8% lower at $20.68