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Jack in the Box (JACK) Stock Falls Despite Q4 Earnings Beat

DPZ MCD JACK PZZA

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Jack in the Box Inc. (JACK - Free Report) reported better-than-expected fourth-quarter fiscal 2016 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

However, the company’s shares declined over 3% in afterhours trading on Nov 21, mirroring investor concerns surrounding decelerating comps growth.

Earnings and Revenue Discussion

Adjusted earnings of $1.03 per share surpassed the Zacks Consensus Estimate of 88 cents by over 17%. Further, the bottom line surged over 66% year over year on reduced expenses and a lower tax rate. Excluding the 53rd week of operations, adjusted earnings per share were up 48.4% year over year.
 

Sales of $398.4 million marginally beat the Zacks Consensus Estimate of $398.1 million by 0.08%. The top line also grew 12.5% on a year-over-year basis.

Behind the Headline Numbers

Comparable-store sales (comps) at the Jack in the Box company stores inched up 0.5%, lower than the gain of 4.1% in the prior-year quarter. Same store sales at franchised stores were up 2.4% compared with a gain of 6.9% in the year-ago quarter. System stores increased 2% compared with a gain of 6.2% in the comparable period last year.

Comps at company-owned Qdoba restaurants were up 1.2% backed by an increase in transactions and growth in catering sales. Comps had however increased 6.1% in the year-ago period. Comps at franchised restaurants saw 0.4% growth during the quarter compared with a gain of 7.2% reported a year ago. System same-store sales were up 0.8% compared with a gain of 6.6% in the year-ago quarter.

The company’s consolidated restaurant operating margin was 19.7% of total sales, down 30 basis points (bps) year over year. Restaurant operating margin expanded 70 bps for the Jack in the Box company restaurants backed by favorable food and packaging costs. Operating margin contracted 220 bps at the Qdoba restaurants. For Qdoba, costs associated with new restaurant openings, higher promotional activity and elevated costs related to technology upgrades resulted in a deterioration in operating margin.

SG&A expenses for the fiscal fourth quarter, as a percentage of revenues, were 12.1%. This was down 330 bps from the prior-year quarter. The decrease reflects lower advertising costs at Qdoba, and a decline in pension and postretirement benefits related to the sunsetting of the company's qualified pension plan.

JACK IN THE BOX Price, Consensus and EPS Surprise

 

JACK IN THE BOX Price, Consensus and EPS Surprise | JACK IN THE BOX Quote

Fiscal 2016 Results

Adjusted earnings per share in fiscal 2016 were $3.86, which came ahead of the Zacks Consensus Estimate of $3.72 and increased 28.7% year over year. Excluding the 53rd week of operations, adjusted earnings per share were up 25.7% year over year.

Total revenue of $1.6 billion increased 3.8% year over year and were in line with the consensus mark.

Dividend Hike

The board of directors announced a 33.3% increase in the quarterly dividend from 30 cents to 40 cents per share, payable on Dec 16, 2016, to shareholders of record as of Dec 5, 2016. This adds up to an annual dividend of $1.60, representing a dividend yield of 1.6%.

Fiscal First-Quarter 2017 Comps Guidance

For the first quarter of fiscal 2017, the company expects same-store sales to grow in the range of 2–4% compared with the year-ago comps growth of 1.4% at the Jack in the Box restaurants.

For the Qdoba restaurants, same-store sales are projected to be flat to up 1% compared with the year-ago quarter comps growth of 1.5%.

Fiscal 2017 Guidance

Earnings per share, excluding restructuring charges and gains or losses from refranchising, are expected in the range of $4.55 to $4.75 in fiscal 2017. The Zacks Consensus Estimate is pegged at $4.71 per share.

The company expects comps to grow in the range of 2–3% at both Jack in the Box company-owned restaurants and Qdoba restaurants.

Commodity deflation is expected to be approximately flat to down 1% for both Jack in the Box restaurants and Qdoba.

Consolidated restaurant operating margin is expected to be roughly 20% to 21%.

Meanwhile, capital expenditures are anticipated in the range of $105 million to $115 million.

Zacks Rank & Stocks to Consider

Jack in the Box has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Domino's Pizza, Inc. (DPZ - Free Report) , McDonald's Corp. (MCD - Free Report) and Papa John’s International, Inc. (PZZA - Free Report) . While Domino’s sports a Zacks Rank #1 (Strong Buy), Darden and Papa John’s carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Domino’s 2016 earnings moved up 2.4% over the last 60 days. Meanwhile, for full-year 2016, EPS is expected to improve 22.8%.

The Zacks Consensus Estimate for McDonald's 2016 earnings climbed nearly 2% over the last 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 6.16%.

Papa John’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 11.31%. Further, for 2016, EPS is expected to grow 19.9%.

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