CKE Shares Climb 15% on Soaring 3rd-Quarter Earnings

Shares of CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s fast-food chains, jumped nearly 15% on Tuesday, a day after the company reported a thirteenfold increase in its third-quarter profit.

The Carpinteria, Calif.-based company Monday reported net income of $13.1 million, or 20 cents a share, up from $939,000, or 2 cents, a year earlier.

The performance exceeded the 17-cent estimate of analysts surveyed by Thomson First Call.

Revenue grew 4% to $348.9 million from $334.8 million in the same period last year. And same-store sales, or sales at stores open at least a year, increased 7.9% and 4.5% at Carl’s Jr. and Hardee’s, respectively.

“The third quarter was a very profitable and encouraging quarter for our company,” CKE Chief Executive Andrew F. Puzder said during a conference call Tuesday.

Shares of CKE climbed $1.75 to $13.80 on the New York Stock Exchange.

The profit increase was largely due to a drop in coupons and greater sales of more expensive sandwiches, including Hardee’s Angus beef Thickburger and Carl’s Jr.’s Western Bacon Cheeseburger and Guacamole Bacon Chicken Sandwich.

The average check at Carl’s increased to $5.84 in the third quarter from $5.53.

Since the third quarter ended, the company has unveiled two premium sandwiches, the Pastrami Burger and the Breakfast Burger, a burger topped with a fried egg, bacon, hash browns and cheese, which analysts expect to push up sales further among its young audience.

“Most of the burger places have been pushing anything but burgers,” said analyst John Beisler of Monarch Research, who rates the stock a “buy.” “Carl’s Jr. and Hardee’s have kept on message and they are getting a little bit of a reward.”

However, given the big pickup in sales at Carl’s Jr. and Hardee’s earlier this year, Beisler said, there’s a chance that the company’s same-store sales could run slightly negative early next year.

However, total revenue and profit should continue to rise, analysts say, as the company rolls out products and continues to pay down debt.

CKE has repaid $87 million of its debt since June and secured a lower interest rate.

CKE Restaurants executives said this savings could free up enough cash for the company to focus on expansion once again, and perhaps repurchase more of its stock.

“The turnaround situation is still in the works,” Beisler said. “[But] this company is clearly light-years ahead of where it was two years ago at this time.”