How Jack in the Box Outperformed Its Peers in 2Q16



Restaurant classifications

Based on the type of service they provide, restaurants are classified into six categories: fast food, casual dining, fast casual, family dining, pizza, and café restaurants. In this series, we’ll focus on fast food restaurants.

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Fast food restaurants

Fast food restaurants serve food that can be prepared and served quickly. They usually don’t offer table services, and items on the menu are limited.

In this series, we’ll look at fundamental metrics investors should look at for the following five companies:

  • McDonald’s (MCD): a fast food restaurant, headquartered in Oak Brook, Illinois, that sells hamburgers and went public in 1965
  • Wendy’s Company (WEN): a fast food restaurant chain, headquartered in Dublin, Ohio, that sells hamburgers, chicken sandwiches, and french fries
  • Restaurant Brands International (QSR): a Canadian fast food company, headquartered in Oakville, Ontario, that owns Burger King and Tim Hortons
  • Sonic (SONC): a fast food restaurant chain, headquartered in Oklahoma City, Oklahoma, with hamburgers and french fries as its main menu items
  • Jack in the Box (JACK): a fast food company that owns Jack in the Box, which serves hamburgers and cheeseburgers, and Qdoba Mexican Grill, a fast casual restaurant chain

Stock performance

2Q16 was a mixed quarter for fast food restaurants. Out of five fast food restaurants considered for review, two have delivered positive returns, while three have delivered negative returns. The widening gap between the cost of eating at home compared to the cost of dining out has put pressure on fast food restaurants. On average, the five fast food restaurants have returned 6.5% since the beginning of 2Q16.

As of September 16, 2016, Jack in the Box (JACK) has delivered returns of 54.7% since the beginning of 2Q16. The better-than-expected 1Q16 and 2Q16 earnings have raised JACK’s share price. During the same period, Restaurant Brands International (QSR) has returned 14.4%.

Sonic’s (SONC) share price suffered the most with a decline of 26%. The decline in same-store sales growth has made investors skeptical about investing in SONC. Share prices of McDonald’s (MCD) and Wendy’s (WEN) have fallen by 9.2% and 2.2%, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR Fund (XLY), has returned -1.2% since the beginning of 2Q16. Next, we’ll look at the factors that affected fast food restaurant stocks in 2Q16.

You can also read about pizza restaurants’ 2Q16 performance in Why Was 2Q16 a Good Quarter for Pizza Restaurants? and about fast casual restaurants in Why 2016 Continues to Be a Tough Year for Fast Casual Restaurants.


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