Markets

Jack In The Box (JACK) Down 3.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Jack In The Box (JACK). Shares have lost about 3.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Jack In The Box due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Jack in the Box Q4 Earnings Miss, Sales Beat Estimates

Jack in the Box reported mixed fourth-quarter fiscal 2018 results, wherein the bottom line lagged the Zacks Consensus Estimate but the top line surpassed the same.

Adjusted earnings from continuing operations came in at 77 cents per share, which missed the consensus mark of 83 cents. However, the reported figure increased 5.5% on a year-over-year basis. Total sales of $177.5 million exceeded the consensus mark of $174 million but decreased 23.5% year over year.

Comps Discussion

Comps at Jack in the Box's stores inched up 0.8% compared to the prior-year quarter's decline of 2%. The uptick was driven by average check growth of 2.8%, partially offset by a 2% decline in transactions. In third-quarter fiscal 2018, the company had reported comps growth of 0.6%.

Same-store sales at franchised stores rose 0.4% compared to a 0.7% decline in the prior-year quarter. The metric rose 0.5% in the previous quarter. System-wide same-store sales were up 0.5% compared to a decline of 1% in the prior year quarter. In third-quarter fiscal 2018, system-wide same-store sales increased 0.5%.

Operating Highlights

Jack in the Box's consolidated restaurant operating margin was 22.5%, up 330 basis points (bps) year over year.

Restaurant-level EBITDA increased 300 bps from the year-ago quarter to 26.1%. The upside was owing to benefits from refranchising, partially offset by wage inflation as well as higher repairs, maintenance costs and cost of food packaging.

In the fiscal fourth quarter, franchise operating margin was 50%, down 210 bps year over year. Franchise EBITDA was 58.6%, reflecting a year-over-year decline of 170 bps. The downside can be attributed to rise in costs in the current quarter.

Balance Sheet

As of Sep 30, 2018, cash totaled $2.7 million compared with $4.5 million as of Oct 1, 2017 (end of fourth-quarter and fiscal 2017). Inventories in the quarter under review amounted to $1.9 million, down from $3.4 million at the end of fiscal 2017.

Long-term debt summed $1,037.9 million as of Jul 2, 2018 compared with $1,080 million at the end of fiscal 2017. Cash flows from operating activities declined to $104.1 million in the fourth quarter from $133.7 million at the prior-year quarter end.

The company repurchased 1.6 million for $140 million in fourth-quarter fiscal 2018. Additionally, it has $41 million left under the current authorization.

2019 Outlook

Comps at Jack in the Box system restaurants are envisioned to be in the range of flat to up 2%. Meanwhile, the company continues to expect Restaurant-Level EBITDA within the 26-27% band.

For fiscal 2019, adjusted EBITDA is anticipated between approximately $260 million and $270 million. Capital expenditures are estimated roughly in the range of $30-$35 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.2% due to these changes.

VGM Scores

Currently, Jack In The Box has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Jack In The Box has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Jack In The Box Inc. (JACK): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

JACK

Other Topics

Earnings

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More