Perhaps more of a head-scratcher is the company’s lopsided growth plan, which has it on pace to open 70 to 85 Qdoba restaurants and only 20 to 25 Jack in the Box restaurants in 2013. Its Jack in the Box restaurants are where it can steal market share from McDonald’s and also what offers the greatest potential for same-store sales growth. It’s as if Jack’s management team is content on remaining in McDonald’s shadow to lead the sector out of its struggles. With the stock at 20 times this year’s earnings and with costs rising, I’d suggest avoiding this combo.
Windstream Corporation (NASDAQ:WIN)
Believe it or not, not everyone lives in a big city — and for those who don’t, the media packages that Windstream offers (cable, Internet) are possibly one of the choices, if not the only choice. The problem with Windstream’s business model is that rural customers are leaving en masse because of the improving reach and scope of wireless and satellite networks.
For the quarter, Windstream reported a 2% decline in total revenue despite a 3% increase in business service revenue and a 5% rise in broadband revenue. Windstream’s reliance on enterprises to drive growth is commendable, and its push into enterprise cloud-based businesses with its PAETEC purchases could be a defining factor that reinvigorates growth down the road. But at this very moment, there is absolutely no growth to be found with Windstream, and its 11% yield is all that’s propping up its share price.
In case you think this is just a Windstream problem, it’s not! Frontier Communications Corp (NASDAQ:FTR), which purchased landline assets from Verizon in a number of states in 2010, has seen a near-constant burn of rural customers in spite of its high yield. In its fourth-quarter report, also last week, Frontier noted the loss of 50,400 customers on top of the 51,800 it lost in the third quarter, and the 65,700 it shed in the second quarter of 2012. With little to no growth to be found in rural landline businesses, investors should think twice before chasing these yields.
Foolish roundup
Sometimes an earnings beat or miss isn’t as cut-and-dried as it appears. I’ve given my two cents on what’s next for each of these companies — now it’s your turn to sound off. Share your thoughts in the comments section below and consider adding these stocks to your free and personalized Watchlist.
The article 3 Earnings Reports That Caught My Attention Last Week originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of McDonald’s.
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