SAN DIEGO (

TheStreet

) --

Jack in the Box

(JACK) - Get Report

shares dropped 9.6% Tuesday morning after the fast food chain missed quarterly earnings expectations.

Jack in the Box posted a 4.2% uptick in fiscal fourth quarter revenue to $563.2 million after the closing bell Monday, compared with year-earlier sales of $540.3 million and ahead of expectations for sales of $543.2 million.

>>Restaurant Stocks: Earnings to Watch

Net income fell sharply however, to $4 million, or 7 cents per share, for the thirteen weeks ended Oct. 3, compared with year-earlier earnings of $40.6 million, or 70 cents per share. Analysts' consensus call had been for a profit of $21 million, or 36 cents per share.

The bottom-line miss led investors to bid Jack in the Box shares sharply lower, trading at $20.40 at midday Tuesday.

Stifel Nicolaus analyst Steve West had a hold rating on Jack in the Box shares with a price target of $24.02 ahead of the report. In October, RBC Capital Markets upgraded Jack in the Box to outperform from sector perform, and raised its price target on the stock by $6 to $28.

Overall same-store sales, or sales at stores open at least one year -- a closely watched metric in the restaurant industry -- at Jack in the Box restaurants fell 3.3%, including 2.8% at franchised stores and 4% at company-owned locations. The decline was "impacted by high unemployment in our major markets for our key customer demographics," said CEO Linda A. Lang. Comps at Qdoba restaurants grew 5.6%, attributed to demand for its Craft 2 menu -- a combo-plate option where customers can mix and match two items -- and higher catering sales.

The company closed 40 Jack in the Box restaurants, and opened 14, during the quarter. It opened 13 Qdoba restaurants. That brings the company's total restaurant count to 2,206 Jack in the Boxes and 525 Qdoba restaurants.

Jack in the Box forecast fiscal 2011 first quarter comps to be in a range from down 1% to up 1% at Jack in the Box restaurants, and up 4% to 6% at Qdoba system restaurants. For the fiscal year, comps should be in a range from down 2% to up 2% at Jack in the Box restaurants, and up 2% to 4% at Qdoba.

Fiscal 2011 earnings per share are expected in a range of $1.41 to $1.68, in line with analysts' consensus call for EPS of $1.54.

Ahead of the earnings release, West had lowered his forecast for 2010's fiscal fourth quarter to 34 cents per share, below consensus and down 52% year-over-year. The revision was attributed to rising ground beef prices, lower refranchising gains and comp deleverage. The analyst expected same-store sales to decline 4%, with comps at its Qdoba restaurants up 4%.

West expected Jack in the Box to book a 1.5% to 2% decline in quarterly revenue despite an extra operating week in the quarter, with net new unit growth of 1% to 2% overall, offset by refranchising. "Though we believe the refranchising program continues to benefit margins, recently the decline in company comps is causing significant deleverage leading to lower restaurant-level operating margins, expected down 280 to 290 basis points," he noted.

Franchise royalty growth of 15% should offset some of the margin declines, he added, though what he calls the "lumpy" timing of refranchising deals could cause a drop in consolidated operating margins of up to 310 basis points, after excluding refranchising gain differences. West also said to look for a three-cent-per-share gain from non-operating items based on a lower share count and lower interest expense, offset partially by a higher tax rate.

Like

Wendy's Arby's

(WEN) - Get Report

,

Jack in the Box has been tapped as a potential private-equity takeover target. "The right private owner might help one or more of these chains eventually become better, and likely smaller, competitors" to McDonald's, UBS wrote in a note to investors earlier this fall.

Restaurant chain peer

Cracker Barrel Old Country Store

(CBRL) - Get Report

posted 2011 fiscal first-quarter earnings of $23.7 million, or $1.01 per share, on Tuesday.

Results topped expectations for earnings of $21.8 million, or 92 cents, and were 31.7% higher than year-earlier profits of $18 million, or 78 cents per share.

Investors were unimpressed, bidding Cracker Barrel shares 6.2% lower to trade at $54.21, thanks to lower-than-expected revenue.

Cracker Barrel's top line came in at $598.7 million, shy of expectations for $600.3 million though 3% higher than year-earlier sales.

Cracker Barrel said comps and retail sales increased 2.4% and 1.5%, respectively, in the recent quarter, thanks in part to a 0.5% uptick in guest traffic.

The Lebanon, Tenn.-based restaurateur reaffirmed its fiscal 2011 outlook for revenue to grow between 3% and 4.5%, or between $2.47 billion and $2.51 billion.

Forecasted revenue growth is based on the opening of 11 new Cracker Barrel units during the year, comps growth between 1.5% and 3% and comparable store retail sales growth between 2% and 4%.

Fiscal 2011 EPS is projected to be in the range of $3.95 to $4.10 per share. Analysts expect Cracker Barrel to post full-year EPS of $4.07 per share.

-- Written by Miriam Marcus Reimer in New York.

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