) recently authorized a new stock repurchase program, thereby
maintaining the trend of returning wealth to its shareholders
from time to time, depending on market conditions. Under this
program, the company is authorized to repurchase up to $40.0
million of its common stock by Aug 31, 2014.
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Earlier, in Jan 2013, the company authorized a repurchase program
of up to $55.0 million of its common stock, which is scheduled to
expire on Aug 31, 2013. About $18.4 million is available for
repurchase under this stock repurchase program.
Prior to this, in Aug 2012, the company's board of directors had
allocated up to $40.0 million for common stock repurchase through
Aug 31, 2013 and in Oct 2011, this chain of drive-in restaurants
approved up to $30.0 million for common stock repurchase through
Aug 31, 2012.
The persistent increase in share buyback authorization reflects
the company's confidence in its fundamentals. At the same time,
the share buyback will help the company reduce outstanding share
count, thereby increasing earnings per share and return on
equity. Management expects the latest authorization to benefit
earnings in fiscal 2014.
Apart from bolstering shareholder value, this strategic move will
also lift the relatively undervalued share price. Moreover, the
step is also a perfect medium for the use of excess cash.
This Zacks Rank #3 (Hold) company is gradually moving in a
positive direction. Increasing focus on franchising, expansion of
drive-in facilities, comps improvement, execution of a
point-of-sale system and effective utilization of cash are
Sonic's long-term goals.
At the end of third-quarter fiscal 2013, the company had cash and
cash equivalents worth $53.5 million. Long-term debt due after
one year stood at $436.1 million. Last month, it also efficiently
refinanced some of its debt at a lower rate and lowered interest
expenses. Management expects to generate free cash flow of
approximately $45-$50 million in fiscal 2013, which will help
fund this new repurchase program and pay down debt.
Some other stocks in the restaurant sector worth a look are
The Wendy's Co.
Domino's Pizza Inc.
Burger King Worldwide Inc.
), all carrying a Zacks Rank #2 (Buy).