It has been about a month since the last earnings report for Jack In The Box (
JACK Quick Quote JACK - Free Report) . Shares have lost about 10.1% in that time frame, underperforming 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 catalysts.
Jack in the Box’s Q3 Earnings Top Estimates, Rise Y/Y
Jack in the Box reported decent third-quarter fiscal 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. The top declined year over year, while the bottom line increased from the prior-year quarter’s figure.
For fiscal 2023, the company expects annual commodity cost inflation to be up 8-10% year over year. Also, it expects wage inflation to be up 3-6% compared with fiscal 2022 levels. Earnings & Revenues Details
During the fiscal third quarter, adjusted earnings from continuing operations came in at $1.45 per share. The figure beat the Zacks Consensus Estimate of $1.33. The metric increased 5.1% from $1.38 reported in the prior-year quarter.
Quarterly revenues of $396.9 million beat the Zacks Consensus Estimate of $394 million by 0.9%. However, the top line dropped 0.3% on a year-over-year basis. Franchise rental revenues increased 7.7% year over year to $86.2 million. Our estimate for the metric was $61.5 million. Franchise royalties and other revenues increased 5.6% year over year to $55 million. This figure compares to our projection of $54.1 million. Franchise contributions to advertising and other services revenues rose 12.3% year over year to $57.2 million. This figure compares to our projection of $51.9 million. Company restaurant sales during the quarter came in at $198.5 million (compared with $215.2 million reported in the prior-year quarter). This figure compares to our projection of $223.6 million. Comps Discussion
In the quarter under review, comps at Jack in the Box’s stores increased 6.9% year over year compared with a 3.5% growth reported in the prior-year quarter. The upside was primarily driven by growth in average checks and traffic. Our estimate for the metric was 5.7%.
Same-store sales at franchised stores increased 8% year over year against a decline of 1% reported in the prior-year quarter. Systemwide same-store sales increased 7.9% year over year against a decline of 0.6% reported in the year-ago quarter. Our estimate for the metric was 5.1%. Del Taco Performance
During third-quarter fiscal 2023, same-store sales rose 1.7%, comprising franchise same-store sales growth of 1.8% and company-operated same-store sales growth of 1.7%. During the quarter, the company reported two franchise openings.
During the fiscal third quarter, restaurant-level adjusted margin came in at 21.8% compared with 15.8% in the prior-year quarter. The upside was driven by substantial sales leverage and solid sales in Oklahoma and Kansas City.
Food and packaging costs (as a percentage of company restaurant sales) fell 110 basis points (bps) year over year to 29.5%. The franchise level margin was 41.1% in the fiscal third quarter compared with 41.4% reported in the prior-year quarter. During the quarter, selling, general and administrative expenses accounted for 10% of total revenues (compared with 10.1% in the prior-year quarter). Our estimate for the metric was 10.4%. Balance Sheet
As of Jul 9, 2023, cash totaled $154.1 million compared with $94.9 million as of Apr 16, 2023. Inventories during the quarter came in at $4.6 million compared with $5.3 million reported in the previous quarter. Long-term debt (net of current maturities) totaled $1,731.4 million as of Jul 9, 2023, compared with $1,737 million at the end of Apr 16, 2023.
During the fiscal third quarter, the company repurchased nearly 0.3 million shares for an aggregate cost of $26.9 million. As of Aug 9, 2023, the company stated the availability of $115 million under its repurchase program. The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Sep 18, 2023, to shareholders on record as of Sep 6, 2023. Outlook
The company reaffirms its fiscal 2023 guidance. However, the company has made an exception with respect to refranchising Del Taco restaurants and share repurchases. The company now expects to refranchise 90-120 Del Taco restaurants in fiscal 2023, up from previous guidance of 65-85 restaurants.
For fiscal 2023, the company expects adjusted earnings from operations to range within $5.90-$6.10 per share. In fiscal 2023, the company expects to repurchase $80 worth shares up from the previous expectation of $70 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 -10.7% due to these changes.
At this time, Jack In The Box has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Jack In The Box has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.