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Jack in the Box (JACK) Q4 Earnings to Gain From Refranchising

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Jack in the Box Inc. (JACK - Free Report) is scheduled to report fourth-quarter fiscal 2018 results on Nov 19, after the closing bell.

Despite undertaking various sales-building initiatives like regular menu innovation, and increased focus on catering, delivery and marketing, we expect the company’s overall top line to suffer in the fiscal fourth quarter due to an ongoing decline in traffic and demand. Meanwhile, refranchising benefits are expected to have boosted earnings in the to-be-reported quarter.

Notably, shares of Jack in the Box have lost 19.6% over the past year, underperforming the industry’s rally of 14.6%.

Let’s delve deeper to find out how the company’s top and bottom lines will shape up this earnings season.


Soft Demand to Hurt Top Line

Lower traffic and soft demand are likely to impact sales of Jack in the Box in the fiscal fourth quarter. In the fiscal third quarter, total sales decreased 23.6% year over year. The declining trend is likely to have continued in the to-be-reported quarter as well. The company expects fiscal fourth-quarter comps to be 1-2% compared with 1% decline in the year-ago quarter.

The Zacks Consensus Estimate for sales in the fiscal fourth quarter is pegged at $175.5 million, reflecting 48.2% year-over-year decline.

Earnings to Gain

Jack in the Box restaurants are currently 94% franchised. The company plans to close its refranchising initiative with the sale of another restaurant in the fourth quarter of fiscal 2018. We believe that franchising a large chunk of its system will lower its general and administrative expenses, and thereby boost earnings.

Further, in the fiscal third quarter, the company witnessed a decline in its general and administrative expenses that was primarily because of $3.6 million in transition services income relating to the sale of Qdoba. We believe that these synergies have also been realized in the fiscal fourth quarter.

Subsequently, the consensus estimate predicts fiscal fourth-quarter earnings at 84 cents, suggesting 15.1% growth from the year-ago quarter.

What the Zacks Model Unveils

Our proven model shows that Jack in the Box is likely to beat earnings estimates this quarter. This is because the stock has the right combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Jack in the Box has an Earnings ESP of +0.73% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jack In The Box Inc. Price and EPS Surprise

 

Other Stocks to Consider

Here are some other companies in the Retail-Wholesale sector, which, per our model, have the right combination of elements to post an earnings beat in the to-be-reported quarter.

RH (RH - Free Report) has an Earnings ESP of +2.18% and a Zacks Rank #1. The company is likely to report quarterly numbers on Dec 4.

AutoZone (AZO - Free Report) is expected to release quarterly results on Dec 4. The company currently carries a Zacks Rank #2 and has an earnings ESP of +0.08%.

American Eagle Outfitters (AEO - Free Report) has an earnings ESP of +2.95 and sports a Zacks Rank #1. It is expected to report quarterly numbers on Dec 5.

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