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Jack in the Box (JACK) Beats Q4 Earnings Estimates, Stock Up

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Jack in the Box Inc. (JACK - Free Report) reported solid fourth-quarter fiscal 2020 results, wherein earnings and revenues not only surpassed the Zacks Consensus Estimate but also increased on a year-over-year basis. Following the quarterly results, shares of the company inched up 6.6% during after-hour trading on Nov 18.

Adjusted earnings from continuing operations came in at $1.61 per share, beating the Zacks Consensus Estimate of $1.14 by 41.2%. The metric also increased 69.5% from 95 cents reported in the prior-year quarter.

Revenue Details

During the fiscal fourth quarter, total revenues of $255.4 million surpassed the Zacks Consensus Estimate of $249 million by 2.6%. Moreover, the top line grew 15.4% on a year-over-year basis.

Jack In The Box Inc. Price, Consensus and EPS Surprise


Jack In The Box Inc. Price, Consensus and EPS Surprise

Jack In The Box Inc. price-consensus-eps-surprise-chart | Jack In The Box Inc. Quote

Franchise rental revenues increased 23.1% year over year to $78.7 million. The increase was primarily backed by the adoption of ASC 842 as well as higher percentage rent revenues due to a rise in franchise restaurant sales.

Franchise royalties and other revenues increased 15.1% year over year to $44.9 million owing to a rise in franchise same-store sales.

Franchise contributions to advertising and other services revenues increased 14.2% year over year to $45.1 million, primarily due to a rise in technology and sourcing fees, partially offset by a drop in marketing contributions.

Comps Discussion

Comps at Jack in the Box’s stores increased 9.6% in the fiscal fourth quarter compared with 3.5% growth in the prior-year quarter. This upside can be attributed to average check growth of 21.9%. However, transactions declined 12.3% in the quarter.

Same-store sales at franchised stores grew 12.4% compared with 3% growth in the prior-year quarter. Meanwhile, system-wide same-store sales increased 12.2% compared with 3% growth in the year-ago quarter.

Operating Highlights

Restaurant-level adjusted margin expanded 280 basis points (bps) in the fiscal fourth quarter from the year-ago quarter to 27%. The increase was backed by improvements in labor and food and packaging costs.

Notably, labor costs improved 120 bps on the back of sales leverage, partially offset by approximately 6% wage inflation. Meanwhile, food and packaging costs (as a percentage of company restaurant sales) decreased 100 bps owing to menu price increases and positive mix shift. However, this was partially offset by higher ingredient costs. Commodity costs during the fiscal fourth quarter increased 0.4% year over year.

Franchise level margin was 41.3% in the fiscal fourth quarter compared with 40.8% in the prior-year quarter.

During the fiscal fourth quarter, selling, general and administrative expenses accounted for 5.8% of total revenues compared with 4.7% in the prior-year quarter.

Balance Sheet

As of Sep 27, 2020, cash (inclusive of restricted cash) totaled $236.9 million compared with $151.6 million as of Sep 29, 2019. Inventories during the quarter increased 1.8% year over year to $1.8 million. Long-term debt totaled $1,376.9 million as of Sep 27, 2020, compared with $1,274.4 million at the end of Sep 29, 2019.

Owing to the temporary suspension of the share repurchase program on Apr 15, the company did not repurchase any shares during the fiscal fourth quarter.

Jack in the Box currently has $200 million left under the share repurchase authorization, out of which $100 million will expire in November 2021 and the remaining $100 million will expire in November 2022.

On Nov 13, the company declared a cash dividend of 40 cents per share. The dividend will be paid out on Dec 18, 2020, to shareholders on record as of Dec 2, 2020.

Fiscal 2020 highlights

Earnings per share for the full fiscal year came in at $4.65, compared with $4.35 reported in the prior year.

Company restaurant sales for fiscal 2020 was reported at $349 million, compared with 336.8 million in 2019.

Adjusted EBITDA for the 52-week ended Sep 27, 2020 came in at $274.2 million, compared with $269 million reported in the previous year.

Zacks Rank & Key Picks

Jack in the Box currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same space include Brinker International, Inc. (EAT - Free Report) , Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) and Fiesta Restaurant Group, Inc. (FRGI - Free Report) . Brinker sports a Zacks Rank #1, while Red Robin and Fiesta Restaurant carry a Zacks Rank #2 (Buy).

Brinker has a trailing four-quarter earnings surprise of 116.6%, on average.

Red Robin has a three-five year earnings per share growth rate of 10%.

Fiesta Restaurant’s earnings in 2021 are expected to surge 418.8%.

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