Jack in the Box Inc.JACK is set to report fiscal fourth quarter and 2015 results on Nov 17, after the markets close. Last quarter, the company posted a positive earnings surprise of 2.74%. In fact, the company has beaten earnings estimates in the trailing four quarters with an average positive earnings surprise of 4.02%. Let's see what is in store this quarter.
Factors to Consider
Jack in the Box's earnings and revenues have beaten the Zacks Consensus Estimate consistently since the beginning of 2014. The company continues to post positive comps. Also, comps have been outperforming the industry consistently over the past few quarters. Strong sales in all day parts especially breakfast and dinner and focus on catering options in the recent times have been key growth drivers. Sales boost initiatives like regular menu innovations, catering options and marketing efforts are expected to continue to aid comps in the soon-to be reported quarter.
However, higher beef and chicken costs and costs related to its sales initiatives would keep profits under pressure. Also, promotional and advertising expenses and costs related to re-training its entire workforce in hospitality would hurt profits.
Our proven model does not conclusively show that Jack in the Box will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Earnings Surprise Prediction) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.
Negative Zacks ESP : Jack in the Box has an Earnings ESP of -1.54% as the Most Accurate estimate stands at 64 cents while the Zacks Consensus Estimate is pegged higher at 65 cents per share.
Zacks Rank : Jack in the Box's Zacks Rank #2 when combined with a negative Earnings ESP makes surprise predictions difficult.
We caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision momentum.
Stocks to Consider
Here are some companies in the restaurant industry and retail-wholesale sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Bob Evans Farms, Inc. BOBE , with an Earnings ESP of +2.50% and a Zacks Rank #3.
Abercrombie & Fitch Co. ANF , with an Earnings ESP of +15.79% and a Zacks Rank #3.
Beacon Roofing Supply, Inc. BECN with an Earnings ESP of +1.45% and a Zacks Rank #3.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.